The Choice of Trading Venue and Relative Price Impact of Institutional Trading: ADRs versus the Underlying Securities in their Local Markets
We address two important themes associated with institutions’ trading in foreign markets: (1) the choice of trading venues (between a company's listing in its home market and that in the United States as an American Depositary Receipt [ADR]) and (2) the comparison of trading costs across the tw...
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sg-smu-ink.lkcsb_research-41762012-02-14T10:19:02Z The Choice of Trading Venue and Relative Price Impact of Institutional Trading: ADRs versus the Underlying Securities in their Local Markets Chakravarty, Sugato CHIYACHANTANA, Chiraphol New Jiang, Christine We address two important themes associated with institutions’ trading in foreign markets: (1) the choice of trading venues (between a company's listing in its home market and that in the United States as an American Depositary Receipt [ADR]) and (2) the comparison of trading costs across the two venues. We identify institutional trading in both venues using proprietary institutional trading data. Overall, our research underscores the intuition that the choice of institutional trading in a stock's local market or as an ADR is a complex process that embodies variables that measure the relative adverse selection and liquidity at order, stock, and country levels. Institutions route a higher percentage of trades to more liquid markets, and these trades are associated with higher cumulative abnormal returns. We also find that institutional trading costs are generally lower for trading cross-listed stocks on home exchanges even after controlling for selection bias. 2011-01-01T08:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/3177 info:doi/10.1111/j.1475-6803.2011.01298.x https://doi.org/10.1111/j.1475-6803.2011.01298.x Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Finance and Financial Management |
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Finance and Financial Management Chakravarty, Sugato CHIYACHANTANA, Chiraphol New Jiang, Christine The Choice of Trading Venue and Relative Price Impact of Institutional Trading: ADRs versus the Underlying Securities in their Local Markets |
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We address two important themes associated with institutions’ trading in foreign markets: (1) the choice of trading venues (between a company's listing in its home market and that in the United States as an American Depositary Receipt [ADR]) and (2) the comparison of trading costs across the two venues. We identify institutional trading in both venues using proprietary institutional trading data. Overall, our research underscores the intuition that the choice of institutional trading in a stock's local market or as an ADR is a complex process that embodies variables that measure the relative adverse selection and liquidity at order, stock, and country levels. Institutions route a higher percentage of trades to more liquid markets, and these trades are associated with higher cumulative abnormal returns. We also find that institutional trading costs are generally lower for trading cross-listed stocks on home exchanges even after controlling for selection bias. |
format |
text |
author |
Chakravarty, Sugato CHIYACHANTANA, Chiraphol New Jiang, Christine |
author_facet |
Chakravarty, Sugato CHIYACHANTANA, Chiraphol New Jiang, Christine |
author_sort |
Chakravarty, Sugato |
title |
The Choice of Trading Venue and Relative Price Impact of Institutional Trading: ADRs versus the Underlying Securities in their Local Markets |
title_short |
The Choice of Trading Venue and Relative Price Impact of Institutional Trading: ADRs versus the Underlying Securities in their Local Markets |
title_full |
The Choice of Trading Venue and Relative Price Impact of Institutional Trading: ADRs versus the Underlying Securities in their Local Markets |
title_fullStr |
The Choice of Trading Venue and Relative Price Impact of Institutional Trading: ADRs versus the Underlying Securities in their Local Markets |
title_full_unstemmed |
The Choice of Trading Venue and Relative Price Impact of Institutional Trading: ADRs versus the Underlying Securities in their Local Markets |
title_sort |
choice of trading venue and relative price impact of institutional trading: adrs versus the underlying securities in their local markets |
publisher |
Institutional Knowledge at Singapore Management University |
publishDate |
2011 |
url |
https://ink.library.smu.edu.sg/lkcsb_research/3177 https://doi.org/10.1111/j.1475-6803.2011.01298.x |
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1770571137394147328 |