Download or read book Price Discovery between Informationally Linked Markets During Different Trading Phases written by Abul M. M. Masih and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The dynamic nature of the price information transfer when stock and futures markets switch between different price trading phases is examined. This is undertaken by decomposing Australian stock indices and share price index futures contract data into bear and bull periods and analyzing the change in the power of the bi-directional information feedback between the futures market and small, medium and large stocks. Results support the hypothesis that the nature of the price discovery process varies with the trading phase. In particular, during the bull phase small stocks show a marked increase in price exogeneity and futures prices contain relatively less price sensitive fundamental information. We argue that in bull markets, futures trading becomes increasingly associated with non-information trading such as realizing paper profits, portfolio rebalancing and increased noise trading.

Download or read book Price Discovery Between Informationally Linked Markets During Trading Phases written by Allan Hodgson and published by . This book was released on 1998 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Automating the Price Discovery Process written by Mr.Ian Domowitz and published by International Monetary Fund. This book was released on 1992-10-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Automated trade execution systems are examined with respect to the degree to which they automate the price discovery process. Seven levels of automation of price discovery are identified, and 47 systems are classified according to these criteria. Systems operating at various levels of automation are compared with respect to age, geographical location, and type of securities traded. Information provided to market participants, and asymmetries of information between traders with direct access to the automated market and outside investors also are examined. It is found, for example, that the degree of asymmetric information increases with the level of automation of price discovery. The potential for trading abuses related to prearranged trading, noncompetitive execution, and trading ahead of customers is analyzed for each level of automation. Certain levels of automation widen the opportunities for trading abuses in some respects, but may narrow them in others.

Download or read book Market Microstructure in Emerging and Developed Markets written by H. Kent Baker and published by John Wiley & Sons. This book was released on 2013-07-31 with total page 758 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive guide to the dynamic area of finance known as market microstructure Interest in market microstructure has grown dramatically in recent years due largely in part to the rapid transformation of the financial market environment by technology, regulation, and globalization. Looking at market transactions at the most granular level—and taking into account market structure, price discovery, information flows, transaction costs, and the trading process—market microstructure also forms the basis of high-frequency trading strategies that can help professional investors generate profits and/or execute optimal transactions. Part of the Robert W. Kolb Series in Finance, Market Microstructure skillfully puts this discipline in perspective and examines how the working processes of markets impact transaction costs, prices, quotes, volume, and trading behavior. Along the way, it offers valuable insights on how specific features of the trading process like the existence of intermediaries or the environment in which trading takes place affect the price formation process. Explore issues including market structure and design, transaction costs, information flows, and disclosure Addresses market microstructure in emerging markets Covers the legal and regulatory issues impacting this area of finance Contains contributions from both experienced financial professionals and respected academics in this field If you're looking to gain a firm understanding of market microstructure, this book is the best place to start.

Download or read book The Microstructure of Financial Markets written by Frank de Jong and published by Cambridge University Press. This book was released on 2009-05-14 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: The analysis of the microstructure of financial markets has been one of the most important areas of research in finance and has allowed scholars and practitioners alike to have a much more sophisticated understanding of the dynamics of price formation in financial markets. Frank de Jong and Barbara Rindi provide an integrated graduate level textbook treatment of the theory and empirics of the subject, starting with a detailed description of the trading systems on stock exchanges and other markets and then turning to economic theory and asset pricing models. Special attention is paid to models explaining transaction costs, with a treatment of the measurement of these costs and the implications for the return on investment. The final chapters review recent developments in the academic literature. End-of-chapter exercises and downloadable data from the book's companion website provide opportunities to revise and apply models developed in the text.

Download or read book Liquidity Markets and Trading in Action written by Deniz Ozenbas and published by Springer Nature. This book was released on 2022 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.

Download or read book Introduction to Econometrics written by G. S. Maddala and published by . This book was released on 2001-05-08 with total page 672 pages. Available in PDF, EPUB and Kindle. Book excerpt: Introduction to Econometrics has been significantly revised to include new developments in the field. The previous editions of this text were renowned for Maddala's clear exposition and the presentation of concepts in an easily accessible manner. Features: * New chapters have been included on panel data analysis, large sample inference and small sample inference * Chapter 14 Unit Roots and Cointegration has been rewritten to reflect recent developments in the Dickey-Fuller (DF), the Augmented Dickey-Fuller (ADF) tests and the Johansen procedure * A selection of data sets and the instructor's manual for the book can be found on our web site Comments on the previous edition: 'Maddala is an outstanding econometrician who has a deep understaning of the use and potential abuse of econometrics...' 'The strengths of the Maddala book are its simplicity, its accessibility and the large number of examples the book contains...' 'The second edition is well written and the chapters are focused and easy to follow from beginning to end. Maddala has an oustanding grasp of the issues, and the level of mathematics and statistics is appropriate as well.'

Download or read book Essays on Price Discovery in Financial Markets written by Xinquan Zhou and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We begin this thesis with developing a theoretical framework and propose a relevant empirical analysis of the soybean complex prices cointegration relationship in a high-frequency setting. We allow for heterogeneous expectations among traders on the multi-asset price dynamics and characterize the resulting market behavior. We demonstrate that the asset prices autoregressive matrix rank and the speed of reversion towards the long-term equilibrium are related to the market liquidity, unlike the cointegrating vector. Our empirical application to the soybean complex, where we control for volatility, supports our theoretical results when the price idleness of the different assets is properly accounted for. Next we switch to price discovery analysis to investigate the lead-lag relationship between equity and CDS markets within a corporate finance framework. Based on investment grade and high yield firms, we establish a panel framework associated to nine corporate financial characteristics factors related to price volatility, default risk, and company capital structures. Contributing to the ongoing debate over the price discovery process between equity and CDS markets, we detect credit-driven price discovery in equity markets. We demonstrate that price discovery process is more credit market driven when a company's credit risk increases, which is significantly more prominent for small-sized firms with highly volatile equity price, and increasing default probability. At last, we turn to study news impact on the trend and the volatility in commodity market. Applying an innovated textual machine learning to business news articles related to corn markets, we extract topics from news. We demonstrate that textual news about financial markets, soybean-biofuel, crop progress and exports significantly contributes in explaining the corn price dynamics. Our volatility analysis demonstrates that soybean and biofuel media coverage contributes also positively to the level of uncertainty regarding corn price. We conclude that news items related to this topic generally provide outlook information leaving scope for interpretation and thus uncertainty after their release.

Download or read book Who Moves First Price Discovery by Institutional and Retail Investors written by Zheng Wu and published by . This book was released on 2015 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses a data set of 77 million trades from Finland during the period 2003 to 2009 to provide new market wide evidence on which of the two dominant investor categories, foreign institutional or domestic retail investors, contributes most to price discovery. We find foreign institutional investors in our data set dominate the price discovery process. Regression models are estimated to provide additional evidence as to which key determinants (including trading volume, effective spread, cross listing, capital expenditure and leverage) explain the informational contribution of foreign institutions to price discovery. Results from both buys and sells confirm that trading volume is the key factor that explains the information contribution of foreign institutions to price discovery. There is an inverse relation between trading volume and the information contribution to price discovery for buys, while volume is positively related to price discovery in sells. The outcomes of this paper contributes to our understanding of the systematic trading patterns and preferences of foreign institutional traders, and the role they play as counterparties to domestic retail traders during price discovery process in the intra-day space.

Download or read book The Interactions Between Price Discovery Liquidity and Algorithmic Trading for US Canadian Cross Listed Shares written by Bart Frijns and published by . This book was released on 2017 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze price discovery dynamics for Canadian companies cross-listed on the NYSE from January 2004 to January 2011. We employ a structural vector autoregression to assess the interactions between price discovery, liquidity and algorithmic trading activity. We observe that over time, the U.S. market is gaining dominance in terms of price discovery. Improvements in liquidity increase a market's contribution to price discovery, and vice versa. We find that algorithmic trading activity is negatively related to price discovery, indicating negative externalities of high-frequency trading. These results are robust to regulatory changes in the U.S. and fragmentation in the Canadian financial markets.

Download or read book Guide to Financial Markets written by Marc Levinson and published by The Economist. This book was released on 2018-07-24 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt: The revised and updated 7th edition of this highly regarded book brings the reader right up to speed with the latest financial market developments, and provides a clear and incisive guide to a complex world that even those who work in it often find hard to understand. In chapters on the markets that deal with money, foreign exchange, equities, bonds, commodities, financial futures, options and other derivatives, the book examines why these markets exist, how they work, and who trades in them, and gives a run-down of the factors that affect prices and rates. Business history is littered with disasters that occurred because people involved their firms with financial instruments they didn't properly understand. If they had had this book they might have avoided their mistakes. For anyone wishing to understand financial markets, there is no better guide.

Download or read book Exchange Rate Dynamics written by Martin D. D. Evans and published by Princeton University Press. This book was released on 2011-03-14 with total page 561 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive and in-depth look at exchange-rate dynamics Variations in the foreign exchange market influence all aspects of the world economy, and understanding these dynamics is one of the great challenges of international economics. This book provides a new, comprehensive, and in-depth examination of the standard theories and latest research in exchange-rate economics. Covering a vast swath of theoretical and empirical work, the book explores established theories of exchange-rate determination using macroeconomic fundamentals, and presents unique microbased approaches that combine the insights of microstructure models with the macroeconomic forces driving currency trading. Macroeconomic models have long assumed that agents—households, firms, financial institutions, and central banks—all have the same information about the structure of the economy and therefore hold the same expectations and uncertainties regarding foreign currency returns. Microbased models, however, look at how heterogeneous information influences the trading decisions of agents and becomes embedded in exchange rates. Replicating key features of actual currency markets, these microbased models generate a rich array of empirical predictions concerning trading patterns and exchange-rate dynamics that are strongly supported by data. The models also show how changing macroeconomic conditions exert an influence on short-term exchange-rate dynamics via their impact on currency trading. Designed for graduate courses in international macroeconomics, international finance, and finance, and as a go-to reference for researchers in international economics, Exchange-Rate Dynamics guides readers through a range of literature on exchange-rate determination, offering fresh insights for further reading and research. Comprehensive and in-depth examination of the latest research in exchange-rate economics Outlines theoretical and empirical research across the spectrum of modeling approaches Presents new results on the importance of currency trading in exchange-rate determination Provides new perspectives on long-standing puzzles in exchange-rate economics End-of-chapter questions cement key ideas

Download or read book Cross Listing Price Discovery and the Informativeness of the Trading Process written by Roberto Pascual and published by . This book was released on 2009 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the price discovery process of securities that trade at multiple markets with trading sessions that totally or partially overlap. Building on Hasbrouck (1995) information share approach, we introduce a methodology that distinguishes two sources of information asymmetries between markets: traderelated and trade-unrelated informative shocks. This approach determines how much of each market's relative contribution to the price discovery process during the overlapping period is attributable to its own trading activity. We provide empirical evidence on the contribution of the NYSE in the price discovery process of the Spanish cross-listed stocks during the daily two-hour overlapping interval.

Download or read book One Security Many Markets written by Joel Hasbrouck and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: When homogeneous or closely-linked securities trade in multiple markets, it is often of interest to determine where price discovery (the incorporation of new information) occurs. This paper suggests an econometric approach based on an implicit unobservable efficient price common to all markets. The information share associated with a particular market is defined as the proportional contribution of that market's innovations to the innovation in the common efficient price. Applied to quotes for the thirty Dow stocks, the technique suggests that the preponderance of the price discovery takes place at the NYSE (a median 92.7% information share).

Download or read book Trading Frequency and the Efficiency of Price Discovery in a Non Dealer Market written by Shmuel Hauser and published by . This book was released on 2013 with total page 11 pages. Available in PDF, EPUB and Kindle. Book excerpt: The increasing popularity of non-dealer security markets that offer automated, computer-based, continuous trading reflects a presumption that institutionally-set trading sessions are economically obsolete. This theoretical paper investigates the effect of trading frequency, a key feature of the trading mechanism, on the efficiency of price discovery in a non-dealer market. The effect of diverging expectations on error-based and overall return volatility is isolated by tracing the market pricing error to the correlation structures of arriving information and pricing errors of individual traders. The analysis reveals that, due to a portfolio effect, an increase in the trading time interval has contradictory effects on the portion of return volatility arising from pricing errors. A greater accumulation of information increases error-based return volatility, but a greater volume and number of traders per session have the opposite effect. The net effect on overall return volatility can go either way. The results show that return volatility of heavily-traded securities is likely to be minimized under continuous trading, but volatility of thinly traded securities may be minimized under discrete trading at moderate time intervals. The probability that the latter will occur increases with the divergence of expectations among traders. These findings challenge the presumption that automated continuous trading in a non-dealer market is more efficient than discrete trading for all securities regardless of trading volume. Findings are applicable to all economies, but have a special relevance for developing countries where often a single market is dominated by small issues and a low volume of trade. As part of the analysis, we show how to correct the biased estimate of inter-session price volatility when observations are less frequent than the trading sessions themselves.

Download or read book A Random Walk Down Wall Street The Time Tested Strategy for Successful Investing Ninth Edition written by Burton G. Malkiel and published by W. W. Norton & Company. This book was released on 2007-12-17 with total page 454 pages. Available in PDF, EPUB and Kindle. Book excerpt: Updated with a new chapter that draws on behavioral finance, the field that studies the psychology of investment decisions, the bestselling guide to investing evaluates the full range of financial opportunities.

Download or read book Information Flow in a Fragmented Dealer Market written by Laura A. Tuttle and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: The 1990's were a period of rapid change in the trading of Nasdaq stocks. Advances in network technology improved the market's ability to trade efficiently and disseminate real-time information. Concurrently, regulatory changes mandated inclusion of alternate trading venues in the quote montage, and restricted the manner in which customer limit orders are handled by market makers. This dissertation explores the price formation process in the Nasdaq market, examining how fragmentation and imperfect transparency affects price formation. The first essay, "Price Discovery in Nasdaq Issues", investigates price leadership relationships between Nasdaq market makers and Electronic Communications Networks (ECNs). Using the Hasbrouck information share and Gonzalo-Granger common factor methodologies, I show that ECNs provide more than half of the price discovery for approximately one out of three Nasdaq 100 stocks, although ECNs trades account for less than 33% of any Nasdaq 100 issue's trading activity. The second essay, "Hidden Orders, Trading Costs and Information", explores non-displayed (reserve) depth in Nasdaq market-maker quotes in SuperSOES. While the presence of hidden depth at the inside has no effect on effective half-spreads, the information content of a trade (as measured by the midquote adjustment in the 30 minutes post-trade) is lower when reserve size is quoted, suggesting reserve size signals short-term price movements. Displayed depth does not predict daily returns, but the non-displayed orders of investment banks and wirehouses are indicative of daily price changes. In the final essay, "News or Noise: Is the Price Impact of Island Trades Persistent?", I examine the trades on the Island ECN to discover whether their information impact is transient or permanent. I measure price impact at a number of horizons, allowing for the possibility of price reversals from liquidity motivated trades. Using simple regressions, I show Island trades are more informative than other trades only at short time horizons post-trade; at longer horizons, the price impact of an Island trade is not significantly different from trades in other venues. Island trades can be shown to be more informative at longer horizons only when the experimental design controls for the endogeneity of the trading venue decision.