Before and after international cross-listing: an intraday examination of volume and volatility

Abstract

It is known that intraday financial asset price volatility and volume are described typically by volatility that is high near the morning market opening and high again near the afternoon market closing. If European markets are integrated with USA, then the European afternoon volatility and volume peak should decline for firms that are cross-listed in the United States. Using data on German firms listed in USA, we are able to examine the issue of intradaily volatility along with volume in a time-series setting both before and after the listing date. We find the general result that the intradaily volume and volatility curves flatten after cross-listing. Afternoon volatility and volume should flatten due to the opportunity to trade in an overlapping market and extend the trading day beyond the German closing. Morning volatility and volume in Germany should flatten since there are fewer hours of non-trading once American depositary receipt (ADR) trading begins so there is more opportunity for price discovery prior to the German opening. The evidence is consistent with an integrated global trading environment rather than two segmented markets.