Locals, Foreigners, and Multi-Market Trading of Equities: Some Intraday Evidence
Authors:
Preprint
- 13 March 2006
- preprint
- Published by Elsevier in SSRN Electronic Journal
Abstract
Binding foreign ownership limits fragment stock trading in Thailand into distinct markets for locals and foreigners. Foreigners (locals) who buy on the local (foreign) board lose dividends and voting rights (pay a price premium). We observe a surprising amount of cross-market activity among orders and trades from 1999. Cross-market investors submit orders strategically when liquidity is high, trade on patterns in stock returns and prices across markets, and fill their orders at relatively beneficial prices. Holding period returns based on cross-market trades appear particularly profitable. The dual market structure permits traders to profit from their information and trading skill while contributing to price discovery.Keywords
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