Market Quality around Macroeconomic News Announcements: Evidence from the US and Canadian Markets

Bart Frijns; Ivan Indriawan; Alireza Tourani-Rad; Yiuman Tse

doi:10.1111/irfi.12190

Market Quality around Macroeconomic News Announcements: Evidence from the US and Canadian Markets

Bart Frijns, Ivan Indriawan, Alireza Tourani-Rad, Yiuman Tse^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We investigate changes in market quality in the US and Canada during macroeconomic news announcements. We measure market quality in terms of returns dependence, the cost of trading, and pricing errors. Using a sample of cross‐listed stocks and macroeconomic news from both countries, we document that market quality is generally higher in the US than in Canada. The pattern of intraday serial dependence in returns reveals that it takes investors about 5 min less to react to order imbalances in the US than in Canada. We further observe that, around announcement periods, transaction costs increase more in Canada than in the US, suggesting that the US market offers better liquidity. More information is also incorporated into the US market. These results support the view that the US is a prime target for cross‐listing, and are robust to different types of assets and time specifications.

Original language	English
Pages (from-to)	575-612
Number of pages	38
Journal	International Review of Finance
Volume	19
Issue number	3
DOIs	https://doi.org/10.1111/irfi.12190
Publication status	Published - Sept 2019
Externally published	Yes

Keywords

BOND
INFORMATION
LIQUIDITY
LISTINGS
PRICE DISCOVERY
SECURITY
SHARES
STOCK

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10.1111/irfi.12190

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title = "Market Quality around Macroeconomic News Announcements: Evidence from the US and Canadian Markets",

abstract = "We investigate changes in market quality in the US and Canada during macroeconomic news announcements. We measure market quality in terms of returns dependence, the cost of trading, and pricing errors. Using a sample of cross‐listed stocks and macroeconomic news from both countries, we document that market quality is generally higher in the US than in Canada. The pattern of intraday serial dependence in returns reveals that it takes investors about 5 min less to react to order imbalances in the US than in Canada. We further observe that, around announcement periods, transaction costs increase more in Canada than in the US, suggesting that the US market offers better liquidity. More information is also incorporated into the US market. These results support the view that the US is a prime target for cross‐listing, and are robust to different types of assets and time specifications.",

keywords = "BOND, INFORMATION, LIQUIDITY, LISTINGS, PRICE DISCOVERY, SECURITY, SHARES, STOCK",

author = "Bart Frijns and Ivan Indriawan and Alireza Tourani-Rad and Yiuman Tse",

year = "2019",

month = sep,

doi = "10.1111/irfi.12190",

language = "English",

volume = "19",

pages = "575--612",

journal = "International Review of Finance",

issn = "1369-412X",

publisher = "John Wiley and Sons Ltd",

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TY - JOUR

T1 - Market Quality around Macroeconomic News Announcements

T2 - Evidence from the US and Canadian Markets

AU - Frijns, Bart

AU - Indriawan, Ivan

AU - Tourani-Rad, Alireza

AU - Tse, Yiuman

PY - 2019/9

Y1 - 2019/9

N2 - We investigate changes in market quality in the US and Canada during macroeconomic news announcements. We measure market quality in terms of returns dependence, the cost of trading, and pricing errors. Using a sample of cross‐listed stocks and macroeconomic news from both countries, we document that market quality is generally higher in the US than in Canada. The pattern of intraday serial dependence in returns reveals that it takes investors about 5 min less to react to order imbalances in the US than in Canada. We further observe that, around announcement periods, transaction costs increase more in Canada than in the US, suggesting that the US market offers better liquidity. More information is also incorporated into the US market. These results support the view that the US is a prime target for cross‐listing, and are robust to different types of assets and time specifications.

AB - We investigate changes in market quality in the US and Canada during macroeconomic news announcements. We measure market quality in terms of returns dependence, the cost of trading, and pricing errors. Using a sample of cross‐listed stocks and macroeconomic news from both countries, we document that market quality is generally higher in the US than in Canada. The pattern of intraday serial dependence in returns reveals that it takes investors about 5 min less to react to order imbalances in the US than in Canada. We further observe that, around announcement periods, transaction costs increase more in Canada than in the US, suggesting that the US market offers better liquidity. More information is also incorporated into the US market. These results support the view that the US is a prime target for cross‐listing, and are robust to different types of assets and time specifications.

KW - BOND

KW - INFORMATION

KW - LIQUIDITY

KW - LISTINGS

KW - PRICE DISCOVERY

KW - SECURITY

KW - SHARES

KW - STOCK

U2 - 10.1111/irfi.12190

DO - 10.1111/irfi.12190

M3 - Article

SN - 1369-412X

VL - 19

SP - 575

EP - 612

JO - International Review of Finance

JF - International Review of Finance

IS - 3

ER -

Market Quality around Macroeconomic News Announcements: Evidence from the US and Canadian Markets

Abstract

Keywords

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