Volatility links between the home and the host market for U.K. dual-listed stocks on U.S. markets

•We investigate the transmission of idiosyncratic and systematic risks between U.K. ADRs and their underlying stocks.•We defined idiosyncratic and systematic risks as volatility ratios and standardized beta ratios, respectively.•We found that stock variation tends to revert to idiosyncratic variation, while stock variation tends to persist to systematic variation.

We investigate how idiosyncratic and systematic effects impact the volatility risk of U.K. cross-listed stocks. Under the hypothesis that more stock followers enhance information effects on volatility, we examine whether variation in volatility of a cross-listed stock has in a bivariate setting two edges. We establish a two-dimensional volatility variation of different magnitudes for U.K. cross-listed stocks. Specifically, we find that idiosyncratic effects induce volatility reversal, whereas systematic effects induce volatility continuation. Our findings imply that the volatility risk of a cross-listed stock is an integral of intermarket volatility effects.