This article examines how the market quality of European cross-listed stocks is affected by the partial-day availability of close substitutes, i.e., shares of the same companies that are traded in their home markets but are not fully fungible with the cross-listed shares. Our findings suggest that narrower spreads and more competitive liquidity provision during overlapping trading hours reflect a significant impact from the availability of more substitutes in addition to the enhanced information environment and liquidity externalities when home markets are open. Our results also provide a richer picture of specialists’ intraday activities and offer new evidence of market integration.
Moulton, P. C., & Wei, L. (2009). A tale of two time zones: The impact of substitutes on cross-listed stock liquidity [Electronic version]. Retrieved [insert date], from Cornell University, School of Hospitality Administration site: http://scholarship.sha.cornell.edu/articles/175/