I'm an absolute beginner in economics and in the stock exchange and just encountered my first company that was listed in multiple stock exchanges and in multiple currencies. I'm aware of the invisible hand that keeps the prices of one company shares in all of these stock exchanges rationally equal, but I have no idea what is rational f.e. in case when the company is listed in two exchanges and in two currencies like EUR, and DOLLAR and then EUR would suddenly plunge 50%?
I came up with 3 scenarios:
- A: Company stock price in EUR suddenly rises 50% to make it equal with the dollar price that is not changed.
- B: Company stock price in dollars suddenly drops 50% to make it equal with the EUR prices that are not changed.
- C: The truth is probably somewhere in between dollar stock price gets down and EUR price gets up even though I have no idea what would be the ratios here.
I guess the main reason for writing this is that I don't quite understand the currency risk in the above example. If the company would have been listed only in one currency, the situation would be perfectly clear for me, but when it's in multiple currencies and invisible hand forces prices to be equal between various stock exchanges and currencies, then I don't understand what kind of risk I would be taking anymore.