Execution costs of dual listed Australian stocks

Abstract

Theoretical models imply that trading costs should be lower for multiple traded stocks. This study compares the execution costs of a group of stocks which are dually listed (on the NYSE and ASX) to that of a matched group of stocks which are listed only on the ASX. The sample is controlled across several characteristics to control for differences in firm specific characteristics. It is found that the execution costs are lower for the dual listed stocks.

Notes

¹ Papers by Chowdhry and Nanda (1991) and Biais et al . (2000) show that, under certain equilibrium conditions, multiple market trading will exist.

² In a similar context, Gau and Hau (2004) examine microstructure properties of foreign exchange rates.

³ There were 12 ASX stocks listed on the NYSE during the period of study. Of these 12, two were removed as they were preferred stocks.

⁴ Problems in achieving the Huang and Stoll (1996) match on all four characteristics remain in other studies as well. For example, using data from the Paris Stock Exchange, Venkatataraman (2001) uses two out of the four characteristics for his matching procedure and reports that ‘a joint match on three stock characteristics (i.e. including industry) results in large deviation among the matched samples’ (p. 1483).