Accessibility navigation

Information flows and the law of one price

Fan, R., Talavera, O. and Tran, V. (2023) Information flows and the law of one price. International Review of Financial Analysis, 85. 102466. ISSN 1057-5219

Text (Open access) - Published Version
· Available under License Creative Commons Attribution.
· Please see our End User Agreement before downloading.

[img] Text - Accepted Version
· Restricted to Repository staff only

[img] Text
· Restricted to Repository staff only
· The Copyright of this document has not been checked yet. This may affect its availability.


It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing.

To link to this item DOI: 10.1016/j.irfa.2022.102466


This paper explores the role of information flows for the law of one price in an almost frictionless environment. Specifically, we examine whether the volume and content of social media messages are related to the exchange rate pass-through to prices of dual-listed stocks. Our sample includes 37 million Twitter messages mentioning the name of a UK-US cross-listed stock from 2015 to 2018. Using a high-frequency intraday data sample, we observe a negative (positive) link of volume (agreement). The findings suggest that large information flows and a high degree of disagreement add extra frictions for the law of one price. In addition, there is an asymmetric pattern of the pass-through, notwithstanding that there are no import/export or geographically-related frictions. This presents further evidence for the importance of information flows in understanding the law of one price.

Item Type:Article
Divisions:Henley Business School > ICMA Centre
ID Code:109407


Downloads per month over past year

University Staff: Request a correction | Centaur Editors: Update this record

Page navigation