Case | HBS Case Collection | March 1996 (Revised April 2006)

Global Equity Markets: The Case of Royal Dutch and Shell

by Kenneth A. Froot and Andre F. Perold


Royal Dutch and Shell common stocks are securities with linked cash flow, so that the ratio of their stock prices should be fixed. In fact, the ratio is highly variable, moving with the markets where the securities are intensively traded. Royal Dutch trades more actively in the Netherlands and U.S. markets, whereas Shell trades more actively in the United States. The result is that the Royal Dutch/Shell relative price moves positively with the Netherlands and U.S. markets and negatively with the U.K. market. The ability to arbitrage these disparities and their causes are major case focal points.

Keywords: international equity markets; international cost of capital; cross-border valuation; International Finance; Equity; Cost of Capital; Valuation; Cash Flow;


Froot, Kenneth A., and Andre F. Perold. "Global Equity Markets: The Case of Royal Dutch and Shell." Harvard Business School Case 296-077, March 1996. (Revised April 2006.)