Journal of Financial Economics Vol. 82 No. 1 2006
Ripples through markets: Inter-market impacts generated by large trades
Abstract
This paper uses a sample of large trades executed on the London Stock Exchange's SEAQ-I market for European cross-traded firms to investigate their impact on home market prices when parallel markets suffer from information frictions. I find that (a) large London trades produce price impacts in home markets even though no timely information is published, (b) market makers appear to pre- and post-position their inventories by splitting orders across markets, and (c) the price discovery process across markets changes significantly around large trades with the foreign market making a significantly bigger contribution to price discovery at this time, even though information opaqueness exists.
- DOI
- 10.1016/j.jfineco.2005.05.011
- Volume
- 82
- Issue
- 1
- Pages
- 173-196
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref