Exploring the location and price differentials of cross-listed firms for arbitrage opportunities

- Cross-listed Taiwan firms in U.K., Hong Kong, and U.S. are studied.
- Cross-listing locations significantly influence returns of firms.
- Trading volume effect brings 10% average firm returns within 30 days.
- Minimum and maximum arbitrage returns are 2% and 18%.
- Cross-listed firms in the UK and Hong Kong are the most liquid arbitrage locations.

This study analyzes cross-listed Taiwanese firms from 1997 to 2015 to identify the rule of one price, market integration, and arbitrage opportunities. Results show cross-listing locations significant positively and negatively influence home and foreign market returns of firms. The exchange rates insignificantly influence cross-listed firms. Trading volume effect via locational arbitrage opportunities exist in firms with an average return of 10% under 30 days. The minimum and maximum arbitrage average returns are 2% and 18%, respectively. Cross-listed firms in the UK and Hong Kong represent the most liquid arbitrage locations for Evergreen Marine, Far Eastern New Century, and Neo-Neon.