Speed of convergence to market efficiency for NYSE-listed foreign stocks

This paper contributes to the cross-listing literature by documenting the speed of convergence to market efficiency for foreign stocks listed on the NYSE. We find that, on average, it takes 30-60 minutes for a foreign stock to achieve market efficiency. For a comparable US stock, it takes only 10-15 minutes. The significant difference between foreign and US stocks remains robust when the speed is measured by the number of transactions rather than in calendar time. After relevant firm characteristics are controlled for, the time that it takes for foreign stocks to reach efficiency is significantly negatively related to the quality of their home country institutions. We find that one possible channel through which institutions affect the speed is through their impact on information asymmetry.