Pricing spill-over effect

Discuss pricing spill-over effect.

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Assume a firm which is operating in the segmented capital market (for example, China) cross-list its stock in the London or New York. On cross-border listing, firm’s stock will be priced internationally. Moreover, pricing of the remaining purely domestic stocks will get affected in a way that such stocks will be priced partially domestically and partially internationally. Degree of international pricing depends upon the correlations between all these purely domestic stocks and internationally traded stocks.

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