A characterization of the price behavior of international dual stocks: An error correction approach

Offer Lieberman, Uri Ben-Zion, Shmuel Hauser

Research output: Contribution to journalArticlepeer-review

43 Scopus citations

Abstract

The purpose of this study was to investigate dominant-satellite relationships of dually listed stocks. It deals with the interrelations between stocks listed and traded in two international unsynchronized markets. The data exhibit first order non-stationarity and the series across markets are cointegrated. This gives a justification for an error correction model which incorporates a short-run adjustment mechanism. The model is applied for different day-groups. The main findings are: (1) arbitrage opportunities are generally not available; (2) the domestic country usually emerges as the dominant market and the foreign market as the satellite one; (3) the adjustment mechanism coefficient is highly significant for most shares; (4) different behavioral patterns emerge for middle-of-the-week days as compared with beginning/end-of-week days; and (5) the model fits better for the more heavily traded shares.

Original languageEnglish
Pages (from-to)289-304
Number of pages16
JournalJournal of International Money and Finance
Volume18
Issue number2
DOIs
StatePublished - 1 Feb 1999

Keywords

  • Dominant-satellite relationships
  • G15
  • Markets
  • Stocks

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