Home Bias and Market Liquidity
In this paper, we examine the difference in liquidity between NYSE-listed U.S. and non- U.S. stocks. We construct a size-matched U.S. stock and a volume-matched U.S. stock for each non-U.S. stock and compare the Kyle’s λ and spread between non-U.S. stocks and their U.S. matches. Our empirical results show that the average Kyle’s λ and the average bid-ask spread of non-U.S. stocks are significantly larger than those of sizematched U.S. stocks. When non-U.S. stocks are compared with volume-matched U.S. stocks, the difference of spread width remains significant, although the magnitude of difference decreases. In contrast, the Kyles λ difference between non-U.S. stocks and volume-matched U.S. stocks virtually disappears. Overall, our work suggests that the trading costs of non-U.S. stocks are significantly higher than those of size-matched U.S. stocks. They are also higher than the trading costs of volume-matched U.S. stocks, but the significance of the comparison result is tempered. The high trading costs of non-U.S. stocks may help explain why U.S. investors prefer holding domestic portfolios.
Wenjin Kang
Department of Finance and Accounting, NUS Business School, National University of Singapore, Business Link, Singapore 117592
国际会议
西安
英文
1-50
2006-07-17（万方平台首次上网日期，不代表论文的发表时间）