Sie Ting Lau

Valuation effects of international stock exchange listings

Abstract A comprehensive data set consisting of 346 U.S. firm stock listings on ten different stock exchanges is examined in order to determine the valuation consequences of listing on a foreign stock exchange. For the sample of U.S. firms listing abroad, abnormal returns in U.S. trading were: (1) positive around the date of acceptance on the foreign exchange; (2) negative on the first trading day; and (3) negative in the post-listing period for firms listing on the Tokyo and Basel exchanges. Tests for the equality of stock return variances between event periods and market model estimation periods failed to reveal a definitive impact.

An investigation of price discovery in informationally-linked markets: equity trading in Malaysia and Singapore

Abstract Using transactions data for the Kuala Lumpur Stock Exchange and the Stock Exchange of Singapore (SES) for a major Malaysian conglomerate, Sime Darby Berhad, and intraday exchange rate data, we investigate whether and to what extent each exchange contributes to price discovery. Results indicate that the price series are cointegrated. The raw data appear to indicate the presence of arbitrage opportunities, but none exist after taking exchange rate changes into account. Using the common long-memory factors of Gonzalo and Granger (1995, Journal of Business and Economic Statistics 13, 1–9), we show that while the majority of the price discovery (approximately 70%) occurs in the home country (Malaysia), the 26–32% of the price discovery attributable to the SES is statistically significant and exceeds Singapore’s share of the trading volume. Further, we find evidence of strong error correction of Singapore prices to Malaysian prices, but only weak error correction of Malaysian prices to Singapore prices.

Stock returns and beta, firms size, E/P, CF/P, book-to-market, and sales growth: evidence from Singapore and Malaysia

Abstract Using data from Singapore and Malaysia for the period 1988–1996, this paper examines the relationship between stock returns and beta, size, the earnings-to-price ratio, the cash flow-to-price ratio, the book-to-market equity ratio, and sales growth (SG). We find the presence of anomalies in these emerging markets. There is a conditional relationship between beta and stock returns for both countries. During months with positive market excess returns, there is a significant positive relationship. We also find a negative relationship between beta and stock returns during months with negative market excess returns. We document the existence of a negative relationship between stock returns and size for both countries. For Singapore, we also document a negative relationship between returns and SG. For Malaysia, we find a positive relationship between returns and the E/P ratio. These relationships are only significant in non-January months.

Stock returns and the transfer of information between the New York and Tokyo stock exchanges

Abstract This study examines the transmission of pricing information between the New York (NYSE) and Tokyo (TSE) Stock Exchanges using opening and closing stock prices for seven Japanese firms. The results of this study suggest that: (1) sample firm TSE opening returns respond to changes in sample firm NYSE intraday stock performance, with transmission apparently completed at the TSE opening; and (2) sample firm NYSE opening returns, as well as subsequent trading, respond to changes in sample firm TSE intraday stock performance. Taken together, the evidence reported in this study is generally consistent with the notion of semi-strong form market efficiency. (JEL G15).

An Analysis of Transactions Data for the Stock Exchange of Singapore: Patterns, Absolute Price Change, Trade Size and Number of Transactions

The availability of the transactions data of the Stock Exchange of Singapore allows us to examine intraday patterns and the relation among absolute price change, trade size and number of transactions. The presence of a trading halt in the mid-day results in two crude U-shaped return patterns but, contrary to Brock and Kleidons (1992) model, it does not cause volume to be unusually high right before or after the halt. We find a positive relationship between absolute price changes and the number of transactions for both the active and inactive stocks. This supports the findings of Jones, Kaul and Lipson (1994) that these relationships also hold at the intraday level and in a market with different market architecture. Copyright Blackwell Publishers Ltd 2001.

Trading volume and location of trade: Evidence from Jardine group listings in Hong Kong and Singapore

Abstract The switch in primary exchange listing of members of the Jardine Group from Hong Kong to Singapore provides a unique setting in which to examine changes in exchange listings. Previous studies of listing switches from Nasdaq to AMEX/NYSE find increases in liquidity and positive abnormal returns. Clyde et al. (Journal of Finance 52 (1997) 2103) report decreased liquidity and positive abnormal returns associated with switches from AMEX to Nasdaq. In contrast, we find decreased liquidity as measured by trading volume accompanied by negative abnormal returns––demonstrating that expected liquidity increases are not the sole reason for exchange switches and that management may perceive benefits from a switch in listing even if investors do not. Moreover, evidence is accumulating that the increased liquidity observed by previous researches is only associated with switches from smaller to larger markets. In spite of the fact that trading volume declines after the switch, there are still a sufficient number of Hong Kong investors trading in Singapore to cause a statistically significant decline in trading volume in Singapore when there is a holiday in Hong Kong. Hence, order flow is segmented, but not completely. We find that individual firm trading volume is most closely associated with the market on which it is traded most.

Cross-Listings and Home Market Trading Volume: The Case of Malaysia and Singapore

Cross-listings of equities internationally are becoming more common. Using data for Europe and North America, previous studies reject the order flow diversion hypothesis, which states that international cross-listings reduce home country trading volume. We test this hypothesis using data for equities cross-listed in Singapore and Malaysia. We find that trading volume in Malaysia fell 42.9 percent when Singapore markets were closed for holidays. Further, we show that trading volume in Malaysia did not increase following the implementation of regulations that ended the trading of Malaysian equities in Singapore in 1998. Hence, we reject the order flow diversion hypothesis.

Corporate Governance and the Information Content of Earnings Announcements: A Cross-Country Analysis

Using firm-level data from 23 developed markets, we document a positive association between overall firm-level governance quality and the informativeness of earnings announcements measured by abnormal stock return variance. This finding is robust after controlling for the potential endogeneity of firm-level corporate governance. Further analyses reveal that firms with strong governance show little evidence of earnings management, appoint Big 4 auditing firms, and attract analyst following, implying a positive link between strong corporate governance and the information quality of earnings announcements. Finally, there is some evidence that the relation between firm-level governance and market reactions around the announcements exists only in countries characterized by a transparent information environment and strong legal investor protection.

Ownership of Cross-listed Equities: An Investigation of Turnover, Diversification, and Risk

Using data for a sample of Malaysian stocks that are traded in both Malaysia and Singapore, we show that the turnover rate (trading volume relative to shares held) is significantly higher in the foreign market than in the domestic market. We also find that ownership of cross-listed shares by foreign investors is not motivated by diversification benefits. Instead, we find that the proportion of a firms shares held in Singapore is directly related to the firms level of systematic risk. Copyright 2003 Eastern Finance Association.

LOST IN TRANSLATION: WHICH STOCK PRICES BEAR THE BURDEN TO ADJUST TO EXCHANGE RATES?

We examine the role of competing exchanges to restore price parity following currency shocks during 2008, a year characterized by dramatic currency volatility. Burdens on the NYSE and home market to restore price parity for cross-listed stocks are more dynamic than previously thought. Adjustments in NYSE prices are not uniform across stocks, are often less than home market adjustments, and are strongly influenced by differences in order execution quality. We quantify the effect of currency shocks using a three-system error correction model, and show that currency shocks exert independent and profound effects as prices gravitate to restore price parity.