Royal Dutch Shell ordinary shares and securities are associated with cash flow, so to fix the ratio of their share prices. In fact, the ratio is highly variable, moving with the markets in which the securities are traded intensively. Royal Dutch trades more actively in the Netherlands and the U.S., while Shell trades more actively in the United States. The result is that the Royal Dutch / Shell relative price moves positively with the Netherlands and the U.S. markets and negatively with the … Read more »

Royal Dutch Shell ordinary shares and securities are associated with cash flow, so to fix the ratio of their share prices. In fact, the ratio is highly variable, moving with the markets in which the securities are traded intensively. Royal Dutch trades more actively in the Netherlands and the U.S., while Shell trades more actively in the United States. The result is that the Royal Dutch / Shell relative price moves positively with the Netherlands and the U.S. markets and negatively with the British market. The ability to arbitrage these differences and their causes are important points of the case.
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from
Kenneth A. Froot,
Andre F. Perold
Source: Harvard Business School
19 pages.
Release Date: 04 March, 1996. Prod #: 296077-PDF-ENG
Global Equity Markets: The Case of Royal Dutch and Shell HBR case solution

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