Abstract
We examine the asynchronous price movements of the same assets traded on multiple markets. Our sample of stocks simultaneously traded in three different financial markets (Shanghai Stock Exchange, New York Stock Exchange, and Stock Exchange of Hong Kong) represents an ideal setting to investigate the stock price co-movement, directions, and leadership. We find strong evidence that foreign prices lead home prices, but not the reverse effect. Contrary to theory predictions, investors in the firms’ home market respond to idiosyncratic fluctuations in the stock returns in the host markets. It suggests investors pay attention to fluctuations in the stocks listed on the more institutionally developed markets.
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