Macroeconomic news announcements and price discovery: Evidence from Canadian–U.S. cross-listed firms

•We study the impact of macroeconomic news announcements on price discovery.•We examine 38 Canadian firms listed on the TSX and NYSE for the period 2004–2011.•Price discovery shifts significantly towards the NYSE during news announcement days.•Our results suggest that the NYSE is better at processing news than the TSX during announcements.

This study employs macroeconomic news announcements as a proxy for new information arrivals and examines their impact on price discovery. We compare the price discovery of 38 Canadian companies listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE) for the period 2004–2011. First, we observe that price discovery shifts significantly during macroeconomic news announcement days. Second, the NYSE becomes more important in terms of price discovery, regardless of the origin of the news. Third, we examine the relation between price discovery and market microstructure variables. After controlling for liquidity shocks, we find that the impact of news announcements persists. Intraday analyses of price discovery on periods surrounding news releases further support these findings. Overall, our findings suggest that there is a difference in information-processing capability of the two markets, with the U.S. market being better at processing information than the Canadian market during macroeconomic news announcements.