The law of one price, arbitrage opportunities and price convergence: Evidence from cross-listed stocks

The purpose of this study is to analyze price deviations, arbitrage opportunities and price convergence for cross-listed stock. Using a unique and comprehensive sample of dual-listed firms as well as firms with multiple foreign listings, we show that markets of cross-listed stocks are not efficient. We also show that the dynamic of price adjustment is correctly modeled by a multivariate STAR model for which the transition between regimes is affected by both transaction costs and cross-listing.