# If a stock is traded in two or more markets, can it have different prices?

If a stock is traded in two or more markets, can it have different prices (each price in each market will be different)?

What may cause such a situation?

• Hi: I remember many years ago, a trader was sitting next to me at a hedge fund and his strategy found arbitrage possibilities between the ADR of the stock and the regularly non-ADR version of the stock. I don't know what advantage he had or if it's still possible but I remember that he was doing this in around 2003-2004. Oct 9 '21 at 0:55

There exist so called dual listings. Trying to exploit price differences is not arbitrage although many people call it like that (it does not satisfy the definition of arbitrage). The most famous example in my opinion being Royal Dutch Shell in the early 1980s, where Royal Dutch was trading at a discount of approximately 30% relative to Shell.

Although these dual listed companies (Royal Dutch Shell) function as a single operating business, and as such shares represent claims on the very same underlying cash flows, divergence can be substantial and convergence can take many years.

You can find some papers discussing this mispricing and potential causes in the Wikipedia article that discusses Dual-listed companies.

Froot, K.A., and E.M. Dabora, 1999, How are stock prices affected by the location of trade?, Journal of Financial Economics 53, 189-216.

Abe de Jong, A., L. Rosenthal and M.A. van Dijk, 2008, The Risk and Return of Arbitrage in Dual-Listed Companies, June 2008.[2]

Rosenthal, L., and C. Young, 1990, The seemingly anomalous price behavior of Royal Dutch/Shell and Unilever N.V./PLC, Journal of Financial Economics 26, 123-141.

Edit:. Cross-listing and DR's as suggested in the comments are also possible.

Multi-market Trading, Price Spreads and Liquidity: Evidence from Cross-listed Companies by Christina Atanasova and Mingxin Li, February, 2015 Concludes that "foreign currency volatility, home country stock market development and shareholder rights play an important role in explaining the cross sectional variations in the contribution to price discovery."

• Thanks, I am having a bit of hard time understanding the English in your answer (I am not a native speaker of English). I will try to add (accessibility) <br> tags as it might help me to read it more easily. Oct 9 '21 at 0:37
• I rejected your edit request because I believe your suggestion to write "It's an exploit try, but not arbitrage.." ist not proper English (I am not a nativ speaker either). What exactly is hard to understand ? Oct 9 '21 at 2:59
• what I edited is what I grasped as hard to understand in its then current form. Trying to exploit this is not arbitrage. should be written as "Trying to exploit is not arbitrage". Also it was then unclear if you mean to say that any dual listing is not arbitrage. Oct 9 '21 at 3:16
• There exist so called dual listings. Trying to exploit price differences is not arbitrage although many people call it like that (it does not satisfy the definition of arbitrage) Are you saying that dual listing is a kind of arbitrage? If so please edit to clarify. Oct 9 '21 at 3:18
• Dual listing is an expression used when a security (or shares of a company) is listed on more than one stock exchange (not some kind of arbitrage). You asked "If a stock is traded in two or more markets, can it have different prices?". Trading on two markets is called dual listing (or other types like DR's and cross listing); different prices for the same thing (not just stocks) would usually mean that there is arbitrage. Oct 9 '21 at 5:07