Abstract
The growing number of cross-listed stocks has significantly contributed to the integration of national economies over the last few decades, and has consequently strengthened the interdependence between international stock markets. This phenomenon has sparked a fervent debate in academia and in decision-making circles dealing with volatility spillovers between international stock prices. Accordingly, isolated examinations of single foreign cross-listing markets appear inadequate. On this basis, the aim of this article is to recognize volatility transmission patterns within international equity markets using a unique and comprehensive sample of highly traded companies simultaneously cross-listed in the United States and the UK. An important fact to be noted here is that long-range dependence is statistically proved in the studied cases, which means that the efficient market hypothesis is utterly rejected. Therefore, a multivariate fractionally co-integrated model is preliminarily used to fit various samples of high-frequency time series. Resulting residuals are then subject to a deeper analysis, allowing us to reveal significant volatility transmissions between markets of multiple cross-listed stocks. Causality experiments are finally conducted on processed data. The results show strong bi-directional volatility causations between various marketplaces. The overall deduction of this work is that price discovery takes place essentially in local and British markets, thus implying a satellite role in the price discovery process for American exchanges.