RE: New Shaun Day interview2 Apr 2025 16:51
Here's some AI stuff on it, which should clarify what I've said:
When shares of the same company are cross-listed on multiple exchanges, their prices should theoretically be the same after accounting for exchange rates due to arbitrage, but there can be short-term deviations.
Here's a more detailed explanation:
Theoretical Price Parity:
The core concept is that if a share is listed on multiple exchanges, investors can buy low on one exchange and sell high on another, driving prices towards parity.
Arbitrage:
This process of buying low and selling high is called arbitrage, and it ensures that price differences between exchanges are minimized.
Short-Term Deviations:
Despite the theoretical price parity, there can be temporary price differences due to factors like:
Trading Volume and Liquidity: One exchange might have more trading volume or liquidity, leading to temporary price fluctuations.
Information Asymmetry: News or information might reach one exchange before another, creating temporary price discrepancies.
Transaction Costs: Exchange fees and currency conversion costs can also lead to temporary price differences.
Sentiment Differentials: News or sentiment in one market might differ from another, leading to temporary price deviations.
Long-Term Impact:
Over the long term, however, the arbitrage mechanism should ensure that price differences are minimized, and the share price remains relatively stable across different exchanges.
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