Application of the FHT Model: The Effects of Exchange Listing and Cross-Listing on Transaction Costs

Abstract

This paper estimates transaction costs using the FHT model. The FHT model is a recently developed and empirically tested method to measure daily liquidity that outperforms the majority of proxies used in previous studies. Using the FHT model, an analysis is done on the effect of exchange listing and crosslisting on transaction costs for equities listed on the New York Stock Exchange, London Stock Exchange and Euronext. The results indicate that exchange listing and cross-listing have a significant effect on transaction costs and therefore the choice of listing can be used by managers to affect the value of their outstanding securities. The results are significant at the 1% level.