The reaction of South African dual-listed stock prices to international public announcements

Abstract

It is well known that globalisation effects have resulted in increased information transmission, where information is able to influence stock prices across international markets. This study examines the extent to which information, released through public announcements, influence the Anglo American Plc., dual-listed stock price, listed on both the Johannesburg Stock Exchange (JSE) and the London Stock Exchange (LSE). The use of dual-listed stocks provides the unique opportunity to examine how information is able to influence the same stock listed on two different international markets. This study examined the effect of five random public announcements, which entailed a new joint venture, a capital investment, negotiations with mining labour unions, the reporting of annual financial results, and changes to the composition of its Board of Directors. This study obtained substantial evidence which confirmed that all five public announcements caused a volatility spill-over effect, which triggered stock price misalignments. However, the size of the volatility spill-overs and price misalignments were not significant to ensure profitable arbitrage opportunities, though most exhibited long-lasting characteristics. Even so, from all the announcements under evaluation, the announcement regarding the change in the Board of Directors caused the largest volatility spill-over effect and largest price difference, providing the greatest potential to realise a profitable arbitrage opportunity.