Liquidity and price volatility of cross-listed French stocks

Abstract

The changes in the volatility and liquidity of French stocks are examined before and after their cross-listing on the German electronic market, the Xetra. The results are mixed in terms of the change in liquidity and volatility of stocks after cross-listing. It is found that for many stocks volatility of stock prices increases and liquidity declines after cross-listing. Furthermore, similar results are obtained when market volatility in the Paris Bourse is controlled for. These results suggest the migration of orders to the Xetra and the deterioration of the quality of the Paris Bourse with the cross listing of French stocks on the German market, especially for those stocks that are continuously traded on the Xetra. These results seem to be against the integration of the French and German markets during the period analysed in this study. Furthermore, the findings indicate that the trading scheme and the characteristics of the stock should be considered in examining the cross-listing effects.

Impact of International Cross-Listing and Delisting on Return Volatility

“…For each cross-listing and delisting event, we cover a span of six years (three years before and three years after listing or delisting) to detect long-term effects. Bayar andÖnder [4] cover around 500 days surrounding the event dates, while Angelidis, Koulakiotis, Lyroudi, and Tolikas [2] cover 20 days. There is nothing inherently wrong with shorter window.…”

“…Domowitz, Glen, and Madhavan [8] contend the traditional dichotomy between market integration and fragmentation and examine both volatility and liquidity changes due to international cross-listing by comparing Mexican domestic stocks and their American Depositary Receipts. Bayar andÖnder [4] use a similar approach to study liquidity and price volatilities of cross-listed French stocks and provide evidence for the lack of market integration between French and German markets.…”

“…For instance, Barclay, Litzenberger, and Warner [3] conclude that international cross-listing leaves the overall and overnight volatility unaffected, but Bayar andÖnder [4] argue that both volatilities will increase. One possible explanation for the difference is that the empirical methodology they use differs.…”

“…But by taking non-parametric T tests, they can hardly control for firm fixed effects. On the contrary, Bayar andÖnder [4] conduct a model-based analysis for each cross-listed firm in their sample in order to control for the firm fixed effects. But they do not include non crosslisted comparables, which means that they can hardly control for other, say, industry and macro effects.…”

Effects of Investor Base on Value of Stock of Cross Listed Firms: A Caseof Cross Listed Kenyan Firms Listed in the Nse.

“…However, Bayar (2005) shows that corporate valuation increases significantly before and during the year of cross-listing and declines afterwards. Such evidence questions the causality of the relationship between cross listing and firm valuation.…”