Cross-listed stocks as an information vehicle of speculation: Evidence from European cross-listings in the early 1870s
This study deals with the price building process of cross-listed stocks on the most important European stock exchanges in the 1870s. By applying a vector error correction approach we look for cointegration relationships. Obviously, there was already a high degree of cross-border integration. Furthermore, we observe the uncommon phenomenon that it was not the home market Vienna but the foreign market Berlin which was the dominant one in the price-building process. An explanation could be the intense speculation during the 1870s in Berlin. Therefore, cross-listed stocks worked as a vehicle for spreading the ongoing speculation from Berlin to other places.
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