Overnight information and intraday trading behavior : evidence from NYSE cross-listed stocks and their local market information

Kalok CHAN, Mark CHOCKALINGAM, W. L., Kent LAI

Research output: Journal PublicationsJournal Article (refereed)

13 Citations (Scopus)

Abstract

In this paper we study how overnight price movements in local markets affect the trading activity of foreign stocks on the NYSE. We find that local price movements affect not only the opening returns of foreign stocks, but also their returns in the first 30-min interval. The magnitude of local price movements is positively related to price volatility of foreign stocks, and this relation is stronger at the NYSE open and weaker afterward. This result helps explain why intraday price volatility is high at the open and lower at midday. However, local price movements cannot account for intraday variations in trading volume. We also find that trading volume for foreign stocks is strongly correlated with NYSE opening price volatility and weakly correlated with local market overnight price volatility. We interpret the result as evidence that the trading activity of foreign stocks on the NYSE is related more to liquidity trading of US investors and less to local market information.
Original languageEnglish
Pages (from-to)495-509
Number of pages15
JournalJournal of Multinational Financial Management
Volume10
Issue number3-4
DOIs
Publication statusPublished - 1 Dec 2000

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Trading behavior
Local markets
Cross-listed stocks
Market information
New York Stock Exchange
Price volatility
Trading volume
Trading activity
Liquidity
Market price
Investors

Keywords

  • Intraday volatility
  • Market microstructure
  • Multiple-market trading

Cite this

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title = "Overnight information and intraday trading behavior : evidence from NYSE cross-listed stocks and their local market information",
abstract = "In this paper we study how overnight price movements in local markets affect the trading activity of foreign stocks on the NYSE. We find that local price movements affect not only the opening returns of foreign stocks, but also their returns in the first 30-min interval. The magnitude of local price movements is positively related to price volatility of foreign stocks, and this relation is stronger at the NYSE open and weaker afterward. This result helps explain why intraday price volatility is high at the open and lower at midday. However, local price movements cannot account for intraday variations in trading volume. We also find that trading volume for foreign stocks is strongly correlated with NYSE opening price volatility and weakly correlated with local market overnight price volatility. We interpret the result as evidence that the trading activity of foreign stocks on the NYSE is related more to liquidity trading of US investors and less to local market information.",
keywords = "Intraday volatility, Market microstructure, Multiple-market trading",
author = "Kalok CHAN and Mark CHOCKALINGAM and LAI, {W. L., Kent}",
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Overnight information and intraday trading behavior : evidence from NYSE cross-listed stocks and their local market information. / CHAN, Kalok; CHOCKALINGAM, Mark; LAI, W. L., Kent.

In: Journal of Multinational Financial Management, Vol. 10, No. 3-4, 01.12.2000, p. 495-509.

Research output: Journal PublicationsJournal Article (refereed)

TY - JOUR

T1 - Overnight information and intraday trading behavior : evidence from NYSE cross-listed stocks and their local market information

AU - CHAN, Kalok

AU - CHOCKALINGAM, Mark

AU - LAI, W. L., Kent

PY - 2000/12/1

Y1 - 2000/12/1

N2 - In this paper we study how overnight price movements in local markets affect the trading activity of foreign stocks on the NYSE. We find that local price movements affect not only the opening returns of foreign stocks, but also their returns in the first 30-min interval. The magnitude of local price movements is positively related to price volatility of foreign stocks, and this relation is stronger at the NYSE open and weaker afterward. This result helps explain why intraday price volatility is high at the open and lower at midday. However, local price movements cannot account for intraday variations in trading volume. We also find that trading volume for foreign stocks is strongly correlated with NYSE opening price volatility and weakly correlated with local market overnight price volatility. We interpret the result as evidence that the trading activity of foreign stocks on the NYSE is related more to liquidity trading of US investors and less to local market information.

AB - In this paper we study how overnight price movements in local markets affect the trading activity of foreign stocks on the NYSE. We find that local price movements affect not only the opening returns of foreign stocks, but also their returns in the first 30-min interval. The magnitude of local price movements is positively related to price volatility of foreign stocks, and this relation is stronger at the NYSE open and weaker afterward. This result helps explain why intraday price volatility is high at the open and lower at midday. However, local price movements cannot account for intraday variations in trading volume. We also find that trading volume for foreign stocks is strongly correlated with NYSE opening price volatility and weakly correlated with local market overnight price volatility. We interpret the result as evidence that the trading activity of foreign stocks on the NYSE is related more to liquidity trading of US investors and less to local market information.

KW - Intraday volatility

KW - Market microstructure

KW - Multiple-market trading

UR - http://commons.ln.edu.hk/sw_master/6890

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JO - Journal of Multinational Financial Management

JF - Journal of Multinational Financial Management

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