Couple of questions: EV graph changes during the day / EV for ADR shares

[Karin]

Please allow me a couple of newbie questions:

1) I noticed that the RT EV graph changes during the day. What is the reason for that? (Example attached below)

2) Does it make sense to use LEV for ADR shares, given that the main trading venue is outside the US?

Example: the US price of Nokia (NOK) seems to mostly just follow the market in Helsinki until Europe closes at 11:30 AM EST. In the US only 13% of the shares for NOK are held by institutions ( http://www.nasdaq.com/symbol/nok/ownership-summary ) .

Could the EV for just the US market give a misleading picture without the EV data for the European market?

Thanks!
Karin

19277

[Pascal]

Please allow me a couple of newbie questions:

1) I noticed that the RT EV graph changes during the day. What is the reason for that? (Example attached below)

2) Does it make sense to use LEV for ADR shares, given that the main trading venue is outside the US?

Example: the US price of Nokia (NOK) seems to mostly just follow the market in Helsinki until Europe closes at 11:30 AM EST. In the US only 13% of the shares for NOK are held by institutions ( http://www.nasdaq.com/symbol/nok/ownership-summary ) .

Could the EV for just the US market give a misleading picture without the EV data for the European market?

Thanks!
Karin

19277

Hi Karin,

These are very good questions.

First, the EV figures change as the day evolves, because the small/large distribution is recalculated every minute, from the start of the day in order to always keep 50% of all the number of shares in each group.
You will note that TEV never changes, because TEV = LEV + SEV.

If LEV suddenly falls while it had been increasing, it means that large sellers came in more recently and the large "sell" volume that we saw at the start of the day became small sell volume. If you day trade stocks or work with options, this is important information. If you are a position trader, then it is better to wait for a late afternoon view of the LEV pattern in order to take a new position.

Regarding companies that are mainly traded abroad (ADR), you are right to state that LEV is much less reliable.
This is also the reason why I have included the Canadian market, because many commodities linked stocks are traded both in the US and in Canada.



Pascal

[Karin]

Thanks for the quick reply and the explanations!