Macroeconomic news announcements and price discovery: evidence from Canadian-U.S. cross-listed firms

Frijns, BPM
Indriawan, I
Tourani-Rad, A
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This study employs macroeconomic news announcements as a proxy for new information arrivals and examines their impact on price discovery. We compare the price discovery of 38 Canadian companies listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE) for the period 2004–2011. First, we observe that price discovery shifts significantly during macroeconomic news announcement days. Second, the NYSE becomes more important in terms of price discovery, regardless of the origin of the news. Third, we examine the relation between price discovery and market microstructure variables. After controlling for liquidity shocks, we find that the impact of news announcements persists. Intraday analyses of price discovery on periods surrounding news releases further support these findings. Overall, our findings suggest that there is a difference in information-processing capability of the two markets, with the U.S. market being better at processing information than the Canadian market during macroeconomic news announcements.

Price discovery , Macroeconomic news announcements , Cross-listed stocks , Market microstructure
Journal of Empirical Finance. Advance online publication. doi: 10.1016/j.jempfin.2014.05.001
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Authors retain the right to use the accepted author manuscript for personal use, internal institutional use and for permitted scholarly posting provided that these are not for purposes of commercial use or systematic distribution.