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This study examines the short-run dynamics of returns and volatility for stocks traded on the New York and Toronto stock exchanges. The main finding is that inferences about the magnitude and persistence of return innovations that originate in either market and that transmit to the other market depend importantly on how the cross-market dynamics in volatility are modeled. Moreover, much weaker cross-market dynamics in returns and volatility prevail during later subperiods and especially for Canadian stocks with shares dually listed in New York. Implications for international asset pricing, hedging strategies, and regulatory policy are discussed.
George Andrew Karolyi (Sun,) studied this question.