Bid-Ask Spread Decomposition and Information Asymmetry of Firms Cross-Listed in the London and New York Exchanges

Abstract

This paper compares the effective bid-ask spread and examines the decomposition of spread in the London Stock Exchange (LSE) and New York Stock Exchange (NYSE). Results indicate that order persistence cost is generally higher in NYSE than in LSE while order processing cost in NYSE is lower, and higher proportion of the bid-ask spread is directly related to the information inefficiency in LSE.