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

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

US cross-listing and domestic high-frequency trading:Evidence from Canadian stocks

We find that US cross-listing of Canadian stocks enhances domestic high-frequency trading (HFT) activity in the form of both opportunistic trading and market-making. First, US crosslisting boosts HFT low-latency cross-border arbitrage. This highly correlated HFT arbitrage activity across markets enhances stock price efficiency by correcting mispricing. Second, US cross-listing leads to an increase in news trading activity by high-frequency traders around US public macro-news releases. Finally, cross-listing increases a stock’s reliance on high-frequency market makers to provide liquidity. Yet, we find no evidence of higher fragility in liquidity supply after cross-listing.Olga Dodd, Bart Frijns, Ivan Indriawan, Roberto Pascua

Music sentiment and stock returns around the world

This paper introduces a real-time, continuous measure of national sentiment that is language-free and thus comparable globally: the positivity of songs that individuals choose to listen to. This is a direct measure of mood that does not pre-specify certain mood-affecting events nor assume the extent of their impact on investors. We validate our music-based sentiment measure by correlating it with mood swings induced by seasonal factors, weather conditions, and COVID-related restrictions. We find that music sentiment is positively correlated with same-week equity market returns and negatively correlated with next-week returns, consistent with sentiment-induced temporary mispricing. Results also hold under a daily analysis and are stronger when trading restrictions limit arbitrage. Music sentiment also predicts increases in net mutual fund flows, and absolute sentiment precedes a rise in stock market volatility. It is negatively associated with government bond returns, consistent with a flight to safety

The effect of equity market uncertainty on informational efficiency:Cross-sectional evidence

We study the effect of equity market uncertainty (EMUNC) on the informational efficiency of U.S. equity prices. Based on the findings, EMUNC negatively affects informational efficiency, i.e., as EMUNC increases, equity prices become less efficient. More importantly, this negative impact is heterogeneous in the cross-section of stocks, with a stronger negative impact on hard-to-arbitrage stocks. We also find that stocks with a higher historical uncertainty exposure are more sensitive to EMUNC.</p