Effects of Geography and Stock-Market Structure: A Comparison of Cross-Listed Securities

We analyze intraday patterns for a set of cross-listed securities in four markets: the London Stock Exchange (LSE), the NYSE, AMEX, and Nasdaq. Differences in intraday patterns are shown to extend across both geographical and structural boundaries. For example, Nasdaq inside spreads increase sharply immediately following the open. By contrast, inside spreads fall after the open on the floor exchanges (NYSE and AMEX) in our sample as well as on the second dealer market (LSE). We conclude that the incorporation of greater descriptive realism into theoretical models appears to be an essential step for conducting accurate empirical tests of competing theories, and to increasing an understanding of the functioning of these markets.