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Kane, Hayden. "Price Discovery Across Option and Equity Prices." Diss., The University of Arizona, 2014. http://hdl.handle.net/10150/325212.
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This paper measures the channels by which private information is incorporated in prices in the equity and option markets. Using a mispricing events approach and conditioning on the option market being the cause of the mispricing event, I analyse the subsequent behaviour of both the options and equity markets and I find that options markets play an important role in the price discovery process. When conditioning on option caused mispricing events, the equity price adjusts towards the options price to reconcile the prices. I find that around 40% of the option caused mispricing events contain information, and the equity prices adjust 35-40%, depending on the exchange, of the maximum discrepancy before prices reconcile. When the equity market causes the mispricing, the option market follows due to the autoquote mechanism. Additionally, I use Monte Carlo to assess the suitability of the Hasbrouck (1995) Information Share and Gonzalo-Granger (1995) Component Share measures in the option-equity context. I find that neither metric is suitable, however the Putnins (2013) Information Leadership metric is and the options market has on average a 35% information leadership share.
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Scherrer, Cristina Mabel. "Essays on price discovery." Thesis, Queen Mary, University of London, 2013. http://qmro.qmul.ac.uk/xmlui/handle/123456789/8673.
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Financial asset prices reflect investor's perspectives over the current and future situation of a firm, an industry, a country and ultimately, the entire economy. For this reason, how financial asset prices are driven has been a fundamental economic question. Specific market characteristics such as the number of sellers and buyers, investors valuation perceptions, market availability of other assets and legal and technical properties are some of the features that affect asset prices. When the same asset is traded at different venues, these specific characteristics may vary, following a certain degree of heterogeneity across buyers and sellers. The direct consequence is that transaction prices of the same asset differ across markets. However, prices will also not drift apart, since arbitrage opportunities would arise, reducing or even eliminating the differences. Prices of similar securities linked to a single latent price, as derivative markets, for instance, present the same behaviour. Price differences among markets observed at high frequencies are an indication that venues incorporate new information in an unlike way. The structure and design of a market impacts its behaviour, liquidity, effciency, and hence how prices are discovered. The task of identifying the leading markets and understanding how the price dynamics occurs are the main objectives of the price discovery analysis. Chapter 1 introduces the research subject of price discovery, motivating the importance of what this thesis proposes and the results and conclusions obtained. Chapter 2 explains in details the main methodologies used to measure price discovery and the important results in the empirical literature. Chapter 3 motivates the data set this thesis uses, with institutional background details and specific market and firm characteristics. We also present in details the steps we follow to deal with standard issues of high frequency data, such as outliers and errors on a tick-by-tick database and non synchronicity of prices at different markets. Chapter 4 extends the standard price discovery model to estimate the information share (IS) accounting for the information content of both common and preferred non US stocks, their American Depositary Receipts (ADRs) counterparts traded on the New York Stock Exchange and ARCA, and the exchange rate. We gauge the significance of price discovery in the home and foreign markets, through common or preferred stocks. One of the main critiques on the IS methodology is that it does not deliver a single measure when there is contemporaneous correlation among markets. We propose an ordering invariant methodology that delivers a single measure of IS.We find that the foreign market is more important than the home market for the price discovery of Petrobras, the Brazilian stated-owned oil giant, and Vale, one of the largest mining companies in the world. Additionally, the Brazilian market has lost significant importance after the 2008/2009 financial crisis. During this period, common and preferred stocks shared a single common factor, with voting premium being a stationary process. Chapter 5 investigates instantaneous and long-run linkages between common and preferred shares traded at both domestic and foreign markets. We develop a market microstructure model in which the dynamics of the different share prices react to three common factors, namely, the efficient price, the efficient exchange rate, and the efficient voting premium. We show how to identify the structural innovations so as to differentiate instantaneous and long-run effects. First, we obtain dynamic measures of price discovery that quantify how prices traded at different venues respond to shocks on the common factors. Second, we are able to test whether shocks in the efficient exchange rate change the value of the firm. Third, we test whether shocks on the efficient voting premium have a permanent effect on preferred shares. We implement an empirical application using high-frequency data on six Brazilian large companies. We find that, in the long-run, a depreciation of the Brazilian currency leads to a depreciation of the value of the firm that exceeds the expected arbitrage adjustment. In addition, a positive shock on the voting premium yields a positive impact on the value of the firm. Our price discovery analysis also reveals that one trading day suffices to impound new information on all share prices, regardless of the venue they trade at. Finally, Chapter 6 concludes.
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Schnejder, Rasmus. "Price discovery i valutamarkedet : en empirisk analyse = Price discovery in the foreign exchanger market /." Aarhus : Institut for Økonomi, Aarhus Universitet, 2009. http://mit.econ.au.dk/Library/Specialer/2009/20040581.pdf.
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Bastos, Maria Isabel Rodrigues. "Price discovery and price transmission within CO2 European financial markets." Master's thesis, Universidade de Aveiro, 2010. http://hdl.handle.net/10773/5333.
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Mestrado em EconomiaO desenvolvimento económico iniciado com a revolução industrial nos finais do século XVIII, deu origem a níveis crescentes de poluição em todo o mundo. O esgotamento dos recursos naturais, preço pago por todas as amenidades criadas, levou os governos mundiais a procurarem um acordo internacional que limitasse o aumento da poluição. A primeira tentativa a, conseguir o consenso internacional foi o Protocolo de Quioto, que entrou em vigor a 16 de Fevereiro de 2005, 90 dias após a ractificação da Rússia. Nele, 54 países concordaram reduzir em 20% as emissões dos Gases com Efeito de Estufa (GEE), até 2020 e com base nas emissões verificadas em 1990. No seguimento da assinatura do Protocolo de Quioto, a União Europeia pôs em marcha o seu próprio plano de controlo das emissões de carbono, designado por “European Union Emission Trading Scheme (EU-ETS)”, que, desde então, tem liderado os movimentos mundiais para o controlo do CO2. Enquadrando-se nas linhas gerais de Quioto, o EU-ETS foi implementado através duma directiva europeia com o objectivo global de fazer incorporar nos custos de produção as externalidades causadas pelas emissões poluentes e promover o investimento em tecnologias limpas, impondo limites máximos (“caps”) às emissões de cada país e instituindo esquemas específicos para a comercialização de carbono, com vista à mitigação das emissões já emitidas. Alguns anos depois do lançamento do EU-ETS, surgiram os produtos financeiros de carbono. Até ao momento os mercados de emissões ainda não foram estudados de forma consistente, duma perspectiva financeira, e são ainda necessárias novas investigações académicas sobre o tema específico da dinâmica da formação dos preços dos EUA, dos CER e de todos os restantes activos de carbono, incluindo os seus derivados. Assim sendo, e com base na informação publicada pela European Energy Exchange (EEX) ao longo de um período de mais de cinco anos, a presente dissertação procura avaliar qual dos mercados – spot ou forward – lidera o processo de formação do preço do carbono. Após a análise estatística das características dos dados, analisaremos ao pormenor os preços spot e os preços dos futuros de carbono, focando-nos nos conceitos mais importantes dos commodity markets: o convenience yield, o prémio de risco e a relação entre estas duas variáveis. Ao analisarmos os preços dos futuros de carbono duma perspectiva ex-post para verificar se existe evidência empírica para um prémio de risco positivo, concluímos que se verifica uma relação negativa entre os prémios de risco e o time-to-maturity de cada activo em análise. Ao investigarmos quais os factores que influenciam os prémios de risco e o convenience yield, obtemos resultados que sugerem que ambos são afectados negativamente pela volatilidade do preço spot, e que o preço tem um impacto positivo no convenience yield; mais, vemos que no geral os convenience yields influenciam de forma positiva os prémios de risco. Sendo variáveis os resultados obtidos em função da Fase do Protocolo Quioto a que dizem respeito os activos analisados e das respectivas maturidades, há evidência de que os direitos de emissão - e o EU-ETS em particular – parecem estar a atingir os resultados procurados no que diz respeito à protecção do ambiente, reduzindo os GEE. Há também indícios crescentes de que as incertezas quanto à viabilidade futura do EU-ETS estão a diminuir. Como suporte à definição de políticas, destacamos a evidência empírica de que as externalidades provocadas pelos GEE já estão a ser incorporadas nas estruturas de custo dos agentes económicos, nomeadamente nos preços da electricidade. Contudo, a permissão do short-selling e do banking entre períodos sucessivos do Protocolo de Quioto poderia aumentar a liquidez e melhorar a eficiência do mercado de carbono. Por último, os factores combustíveis (carvão, gás e petróleo), condições climatéricas e restrições do mercado, revestiram-se de particular interesse ao evidenciar a relação dos contratos de CO2 com a intensidade de consumo de energia, nomeadamente com os mercados electricidade (spot e de futuros).
World economic development, starting with industrial revolution in the late 18th century, has led to increasing pollution levels all over the world. Depletion of natural resources has been the result and the price paid for all the amenities and comfort bring by development. Because of this, world governments decided to try to find a consensual way to control pollution escalation. The first successful international attempt to do that is known as „The Kyoto Protocol‟ and entered into force on 16 February 2005, 90 days after its ratification by Russia. There, 54 countries put forward the overall goal of reducing GHG emissions by 20% below 1990 levels, until 2020. Following Kyoto Protocol signature, European Union has implemented its own carbon control scheme, the so-called European Union Emission Trading Scheme (EU-ETS), which leads the carbon control worldwide movements, since then. With the general aim of incorporating externalities caused by pollution in the production costs and to foster investment in clean technologies, the EU-ETS was launched through an EU directive. Within Kyoto framework, this new EU ETS imposed emission‟s caps over each European country and established specific carbon trading schemes to mitigate emitted pollution. Some years after the launching of EU ETS, carbon financial products have also developed all over international Stock Exchanges. So far, emission markets have not yet been consistently studied from a financial point of view and we still have a lack of academic work on the specific subject of pricing dynamics of the EUAs, CERs and other carbon assets, as well as its derivatives. So, using European Energy Exchange data with a time spam of more than five years, this thesis attempts to evaluate which market – spot or forward – leads the carbon price discovery process. We focus specifically on carbon future prices and on carbon spot prices, analysing them in a most thorough way. After analyzing the statistical properties of data, we focus on the most important concepts in the commodity markets: the convenience yield, the risk premium and the relationship between these variables, for the Exchange under analysis. We analyze carbon futures prices from an ex-post perspective to find if there is evidence for significant positive risk premia and conclude that a negative relationship between risk premia and time-to-maturity does exist. When testing for factors influencing risk premia and convenience yields, we obtain results implying that spot price volatility impact negatively both of them and that the price itself impact the convenience yield in a positive way; more, generally convenience yields influence risk premia in a positive way. Results change depending on the Kyoto Protocol Phase and on the characteristics of the assets used, but seem to confirm that uncertainties about the future of the EU ETS are disappearing. So, we can assume that allowances appear to be producing the desired results, in terms of environmental protection. For policy, empirical evidence found that there is already a pass-through of externalities caused by GHG costs into the cost structure of economic agents, influencing namely electricity prices. The EU ETS seems, though, to fulfil its goal of reducing GHG emitted. Nevertheless, allowing short-selling and banking between successive Kyoto periods could increase liquidity and improve market efficiency. Finally, the role of fuels (coal, gas and oil), weather and market constraints, was found to be of particular interest relating CO2 contracts to energy consumption intensity, namely to electricity spot and futures markets. Moreover, the recently created liberalized electricity market throughout Europe encouraged the development of environmental protection policies since newly carbon financial contracts emerged in this context.
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Chen, Long. "Price discovery in the foreign exchange market." Thesis, City University London, 2007. http://openaccess.city.ac.uk/8553/.
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This thesis investigates the price discovery in the foreign exchange market using high frequency data. Traditional exchange rate models assume market homogeneity and the sole existence of public information. However. recent studies suggest such assumptions are not well founded and have generated the 'disconnection' puzzle of exchange rates deviating from their fundamentals in the short and medium term. Using EFX tick-by-tick data, we find that information is not always available to all and the actual price discovery process is dynamic and asymmetric. It suggests that some market participants, trading systems or even exchange rates may possess private information. which helps them to lead others in finding the equilibrium prices. It further reveals the importance of studying the microstructure of the foreign exchange market, which may in the future solve the 'disconnection' puzzle that has baffled the exchange rate theory for the past decades.
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Dharmasena, Kalu Arachchillage Senarath Dhananjaya Bandara. "International black tea market integration and price discovery." Texas A&M University, 2003. http://hdl.handle.net/1969.1/273.
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In this thesis we study three basic issues related to international black tea markets: Are black tea markets integrated? Where is the price of black tea discovered? Are there leaders and followers in black tea markets? We use two statistical techniques as engines of analysis. First, we use time series methods to capture regularities in time lags among price series. Second, we use directed acyclic graphs to discover how surprises (innovations) in prices from each market are communicated to other markets in contemporaneous time.
Weekly time series data on black tea prices from seven markets around the world are studied using time series methods. The study follows two paths. We study these prices in a common currency, the US dollar. We also study prices in each country's local currency. Results from unit root tests suggest that prices from three Indian markets are not generated through random walk-like behavior. We conclude that the Indian markets are not weak form efficient. However, prices from all non-Indian markets cannot be distinguished from random walk-like behavior. These latter markets are weak form efficient. Further analysis on these latter markets is conducted to determine whether information among the markets is shared. Vector Autoregressions (VARs) on the non-Indian markets are studied using directed acyclic graphs, impulse response functions and forecast error decomposition analyses. In both local currencies and dollar-converted series, the Sri Lankan and Indonesian markets are price leaders in contemporaneous time. Kenya is an information sink. It is endogenous in current time. Malawi is an exogenous price leader in dollar terms, but it is endogenous in local currency in contemporaneous time.
In the long run, Sri Lanka, Indonesia and Malawi are price leaders in US dollar terms. In local currency series, Indonesia, Kenya and Malawi are price leaders in the long run. We use Theil's U-statistic to test the forecasting ability of the VAR models. We find for most markets in either dollars or on local currencies that a random walk forecast outperforms the VAR generated forecasts. This last result suggests the non-Indian markets are both weak form and semi-strong form efficient.
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Delfino, Denísio Augusto Liberato. "Cointegração e price discovery do risco soberano brasileiro." reponame:Repositório Institucional do FGV, 2007. http://hdl.handle.net/10438/1818.
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Previous issue date: 2007-04-20T00:00:00ZThe law of one price states that all identical assets, traded in different markets, must have only one price. In this dissertation, we aim to examine whether the Brazilian sovereign credit risk, traded in the international financial market, is priced similarly in the traditional bonds market as well as in the new and growing credit derivatives market. In addition to that, we make use of the Price Discovery analysis to study which of the two markets moves more rapidly in response to changes in the credit conditions in the Brazilian economy. As for the empirical analysis, we make use of time series econometrics, more specifically cointegration analysis and vector error correction. Our findings corroborate the theoretical prediction related to the law of one price, i.e., the Brazilian credit risk, either in the bonds market or in the credit derivatives market, move together in the long run. Our results also show that the majority of price discovery occurs in the credit derivatives market.
A lei do preço único afirma que o mesmo ativo negociado em diferentes mercados deve apresentar preços equivalentes. Este trabalho busca verificar se o risco de crédito soberano brasileiro negociado no mercado internacional é precificado de forma semelhante tanto nos tradicionais mercados de títulos quanto no novo e crescente mercado de derivativos de crédito. Adicionalmente, utiliza-se a análise de Price Discovery para examinar qual dos mercados se move mais rapidamente em resposta às mudanças nas condições de crédito da economia brasileira. A análise empírica é feita por meio de modelos de séries de tempo, mais especificamente análise de cointegração e vetor de correção de erros. Os resultados confirmam a predição teórica da lei do preço único de que o risco de crédito brasileiro, tanto nos mercados de títulos quanto no mercado de derivativos de crédito, movem-se juntos no longo prazo. Por fim, a maior parte do Price Discovery ocorre no mercado de derivativos de crédito.
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Hinterholz, Eduardo Mathias. "Price discovery using a regime-sensitive cointegration approach." reponame:Repositório Institucional do FGV, 2015. http://hdl.handle.net/10438/13970.
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This work proposes a method to examine variations in the cointegration relation between preferred and common stocks in the Brazilian stock market via Markovian regime switches. It aims on contributing for future works in 'pairs trading' and, more specifically, to price discovery, given that, conditional on the state, the system is assumed stationary. This implies there exists a (conditional) moving average representation from which measures of 'information share' (IS) could be extracted. For identification purposes, the Markov error correction model is estimated within a Bayesian MCMC framework. Inference and capability of detecting regime changes are shown using a Montecarlo experiment. I also highlight the necessity of modeling financial effects of high frequency data for reliable inference.
Este trabalho propõe um método para examinar variações na relação cointegração de preços de ações preferenciais e ordinárias da bolsa brasileira através de mudanças de regime no sentido de Markov. Este modelo tem como objetivo contribuir tanto para futuros trabalhos em negociações de pares ('pairs trading') quanto, principalmente, para aplicação em descoberta de preços visto que, condicional nos estados, é pressuposta estacionariedade no sistema. Desta maneira seria possível a extração de medidas de 'parcela de informação' (IS) baseadas na representação de médias móveis de um modelo de correção de erros Markoviano, estimado através de um ferramental bayesiano do tipo MCMC por questões de identificação. A validade do modelo no sentido de capturar as variações de regime é demonstrada através de experimento de Montecarlo, bem como é evidenciada a necessidade da modelar não normalidades na distribuição dos dados de alta frequência visando inferência.
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Jin, Zengxiang. "Price discovery in the property forward and spot markets." View the Table of Contents & Abstract, 2007. http://sunzi.lib.hku.hk/hkuto/record/B3828568X.
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Zholos, A. "Liquidity and price discovery on the London stock exchange." Thesis, Queen's University Belfast, 2012. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.557889.
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The London Stock Exchange is constantly changing as the global financial landscape evolves. By aggregating detailed intraday trading data, I analyse its liquidity for a period spanning the introduction of a pure electronic order book platform for the most liquid stocks in 1997, its expansion to include less liquid stocks with market maker participation, the structural and environmental changes brought about by MiFID regulation in 2007, and the beginning of the global financial crisis. By all measures, liquidity has increased over the years, although recently intensified competition from alternative trading venues may be limiting further improvement. The most liquid stocks are the constituents of the FTSE 100 index, which are picked by largest market capitalization. When a new stock is added to this index there is a temporary price effect which I ascribe to the closing auction just before the index is revised. This is a natural time for passive investors who track the index by replicating its composition to adjust their portfolio holdings. The auction trade is facilitated by a build-up of liquidity on the opposite side of the order book in advance, as limit orders are placed in competition to take the other side of this information-free order flow at a premium. Naturally, ordinary trading in index constituents does contain information about individual stocks, groups of stocks and the entire market. Conveniently, another liquid security trades on the market which can be used as a conduit for the latter information: the FTSE 100 exchange-traded fund. Due to arbitrage opportunities its price is closely related to the index, and in fact I determine that they are cointegrated, even intraday. According to the eo integration analysis the fund makes a significant contribution to the index price discovery process, and this is especially evident when order flows are incorporated into the model.
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Nguyen, Minh. "Liquidity and price discovery in the European treasury markets." Thesis, University of Reading, 2010. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.542060.
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Foster, Andrew J. "Information, volatility and price discovery in oil futures markets." Thesis, Brunel University, 1994. http://bura.brunel.ac.uk/handle/2438/5871.
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This thesis presents four related empirical essays which investigate the role of information in crude oil futures markets. The first line of investigation examines the impact of futures trading on spot price volatility and finds that the nature of spot price volatility is affected by derivative trading and the improvements in information discovery which such trading brings. Second, the efficiency of futures markets is examined with respect to their ability to provide unbiased estimates of future spot prices. Here it is concluded that while unbiased estimates are generally provided in the long-term, they tend to be largely biased over the short-term. The third area of investigation looks at the relative ability of contemporaneous spot and futures prices to discover information, where it is found that futures generally exhibit price discovery over spot markets but that the relationship can vary considerably over time and in relation to market conditions. In addition, the investigation suggests that previous studies into such relationships have failed to account for all routes through which information passes between spot and futures markets. Finally the thesis probes the question of the relationship within futures markets between volume, volatility and information. The finding is' that futures markets' prices and trading volume exhibit a positive relation and are jointly driven by the rate of information arrival. The results further suggest that the widely held expectation that volume statistics can improve forecasts of future price change does not hold in the case of oil futures. The overall finding of the thesis is that oil futures markets are well-functioning and in general are of benefit to the underlying spot market.
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Jin, Zengxiang, and 金增祥. "Price discovery in the property forward and spot markets." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2007. http://hub.hku.hk/bib/B38957759.
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Bordonado, Christoffer, and Sven Richard Samdal. "VIX Exchange Traded Products : Performance, Price Discovery and Hedging." Thesis, Norges teknisk-naturvitenskapelige universitet, Institutt for industriell økonomi og teknologiledelse, 2014. http://urn.kb.se/resolve?urn=urn:nbn:no:ntnu:diva-25966.
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This paper investigates the performance, hedging ability and price discovery relationship between some of the most popular exchange traded products with the volatility index VIX as the underlying. We find a large difference in the price discovery function for the direct unleveraged VIX ETPs. The VIX ETPs have good trackingperformance, but suffer from time-decay due to the shape of the VIX futures termstructure. This time-decay makes them unsuitable for buy-and-hold investments,but gives rise to a profitable trading strategy using direct and inverse VIX ETPs.The strategy is robust to transaction costs. Despite being negatively correlatedwith the S&P 500, the ETPs perform poorly as hedging tools. By using simplerebalancing rules, the inclusion of VIX ETPs in a portfolio tracking the S&P 500will decrease the risk-adjusted performance of the portfolio.
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Costello, Greg. "Price discovery and information diffusion in the Perth housing market 1988-2000." UWA Business School, 2004. http://theses.library.uwa.edu.au/adt-WU2005.0034.
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[Truncated abstract] This thesis examines informational efficiency and price discovery processes within the Perth housing market for the period 1988-2000 by utilising a rich source of Western Australian Valuer General’s Office (VGO) data. Fama’s (1970) classification of market efficiency as potentially weak form, semi-strong, or strong form has been a dominant paradigm in tests of market efficiency in many asset markets. While there are some parallels, the results of tests in this thesis suggest there are also limitations in applying this paradigm to housing markets. The institutional structure of housing markets dictates that a deeper recognition of important housing market characteristics is required. Efficiency in housing markets is desirable in that if prices provide accurate signals for purchase or disposition of real estate assets this will facilitate the correct allocation of scarce financial resources for housing services. The theory of efficient markets suggests that it is desirable for information diffusion processes in a large aggregate housing market to facilitate price corrections. In an efficient housing market, these processes can be observed and will enable housing units to be exchanged with an absence of market failure in all price and location segments. Throughout this thesis there is an emphasis on disaggregation of the Perth housing market both by price and location criteria. Results indicate that the Perth housing market is characterised by varying levels of informational inefficiency in both price and location segments and there are some important pricing-size influences.
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Yan, Bingcheng. "Cross-market interactions, price discovery dynamics, and market quality measurement /." Thesis, Connect to this title online; UW restricted, 2005. http://hdl.handle.net/1773/7375.
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Nemiroff, Howard B. "Price discovery around Canadian equity trading halts using intraday data." Thesis, National Library of Canada = Bibliothèque nationale du Canada, 1997. http://www.collectionscanada.ca/obj/s4/f2/dsk1/tape11/PQDD_0016/NQ44869.pdf.
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Ellul, Andrew. "Trading behaviour, price discovery and volatility in competing market microstructures." Thesis, London School of Economics and Political Science (University of London), 2001. http://etheses.lse.ac.uk/2102/.
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The first chapter investigates the price and volatility impacts produced by block trades in an inter-market environment with different microstructures. A sample of European cross-traded securities is employed to investigate whether large trades executed on the foreign market (London Stock Exchange's SEAQ-I market) produce any impacts on the securities' home markets and analyse whether different market microstructures matter. The price impact in the home markets is detected before the large trade is executed on SEAQ-I and proceeds in a protracted fashion, implying that substantial pre- and post-positioning is undertaken by London market makers through the home markets. The new equilibrium price on the home market is reached before the trade information is published on SEAQ-I. Large trades are also found to cause higher price volatility in auction trading systems than in a hybrid market microstructure. The second and third chapters analyse the formation of quoted and effective spreads and their components in three different market microstructures. The results show that quoted and effective spreads generated by a hybrid system (Deutsche Borse's IBIS system) are lower than those generated by both the pure auction system (Paris Bourse's CAC system) and the dealership system (London Stock Exchange SEAQ market). Traders on a hybrid mechanism face the lowest costs and this result holds even when we control for (a) the level of market concentration in liquidity provision, and (b) company-specific news. However, the adverse selection component of the spread is significantly higher in an auction trading system compared to both the dealership and the hybrid trading system. This fifth chapter investigates (a) whether, in a hybrid trading mechanism, voluntary market makers provide a higher level of price stabilisation than limit order traders even if they do not have any obligation to keep orderly markets, (b) the strategic interactions between the limit order book and market makers, and (c) the behaviour of the order flow at times of price uncertainty. We analyse these issues using high frequency data from the London Stock Exchange which has adopted a hybrid market microstructure. We find that prices on the dealership system track the security's true value more efficiently. The dealership system can transact higher volumes with lower price volatility. This evidence suggests that market makers provide price stabilisation, even if they have no binding obligation to do so, thus improving the market's quality. In terms of trading behaviour, we find that in a hybrid trading mechanism, traders are not encouraged to provide liquidity on the order book through limit orders as price uncertainty increases. Instead orders migrate to the dealership system for execution.
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Wu, Zheng. "Price discovery, ownership structure and portfolio diversification by investor categories." Thesis, The University of Sydney, 2019. http://hdl.handle.net/2123/21008.
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This thesis contains three stand-alone studies that relate to price discovery, ownership structure and portfolio diversification by investor categories. The first study uses a data set of 77 million trades from Finland 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. The study finds that foreign institutional investors dominate price discovery, and that the key factor that explains foreign institutions’ information contribution is buy and sell initiated trading volume. The second study offers a global view of what attracts international institutions to invest in corporations around the world. The study finds that institutional investors have a strong preference for stocks in larger firms with higher levels of foreign business operations with greater revenue and higher leverage. Institutions invest in firms in countries with a more volatile macroeconomic environment that operate under a common law system and have tax benefits on dividends. The presence of foreign institutions enhances shareholder value, and firms have better profitability and future growth opportunities. The third study shows that Finnish individual investors hold under-diversified portfolios. In particular, female investors are less diversified than male investors. The average diversification level improves over 20 years of data. The level of under-diversification is greater among younger, low income, less educated and less sophisticated investors. The level of under-diversification is correlated with investment choices that are consistent with overconfidence. As the level of diversification increases, both male and female investors’ performance measures increase.
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Liu, Wenxuan. "Ownership, corporate governance and timeliness of price discovery : Australian evidence." Thesis, Queensland University of Technology, 2012. https://eprints.qut.edu.au/61068/1/Wenxuan_Liu_Thesis.pdf.
Full textAbstract:
This study investigates whether and how a firm’s ownership and corporate governance affect its timeliness of price discovery, which is referred to as the speed of incorporation of value-relevant information into the stock price. Using a panel data of 1,138 Australian firm-year observations from 2001 to 2008, we predict and find a non-linear relationship between ownership concentration and the timeliness of price discovery. We test the identity of the largest shareholder and find that only firms with family as the largest shareholder exhibit faster price discovery. There is no evidence that suggests that the presence of a second largest shareholder affects the timeliness of price discovery materially. Although we find a positive association between corporate governance quality and the timeliness of price discovery, as expected, there is no interaction effect between the largest shareholding and corporate governance in relation to the timeliness of price discovery. Further tests show no evidence of severe endogeneity problems in our study.
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OH, Natalie Yoon-na Banking & Finance Australian School of Business UNSW. "Essays on the dynamic relationship between different types of investment flow and prices." Awarded by:University of New South Wales. Banking and Finance, 2005. http://handle.unsw.edu.au/1959.4/22041.
Full textAbstract:
This thesis presents three related essays on the dynamic relationship between different types of investment flow and prices in the equity market. These studies attempt to provide greater insight into the evolution of prices by investigating not ???what moves prices??? but ???who moves prices??? by utilising a unique database from the Korean Stock Exchange. The first essay investigates the trading behaviour and performance of online equity investors in comparison to other investors on the Korean stock market. Whilst the usage of online resources for trading is becoming more and more prevalent in financial markets, the literature on the role of online investors and their impact on prices is limited. The main finding arising from this essay supports the claim that online investors are noise traders at an aggregate level. Whereas foreigners show distinct trading patterns as a group in terms of consensus on the direction of market movements, online investors do not show such distinct trading patterns. The essay concludes that online investors do not trade on clear information signals and introduce noise into the market. Direct performance and market timing ability measures further show that online investors are the worst performers and market timers whereas foreign investors consistently show outstanding performance and market timing ability. Domestic mutual funds in Korea have not been extensively researched. The second essay analyses mutual fund activity and relations between stock market returns and mutual fund flows in Korea. Although regulatory authorities have been cautious about introducing competing funds, contractual-type mutual funds have not been cannibalized by the US-style corporate mutual funds that started trading in 1998. Negative feedback trading activity is observed between stock market returns and mutual fund flows, measured as net trading volumes using stock purchases and sales volume. It is predominantly returns that drive flows, although stock purchases contain information about returns, partially supporting the price pressure hypothesis. After controlling for declining markets, the results suggest Korean equity fund managers tend to swing indiscriminately between increasing purchases and increasing sales in times of rising market volatility, possibly viewing volatility as an opportunity to profit and defying the mean-variance framework that predicts investors should retract from the market as volatility increases. Mutual funds respond indifferently to wide dispersions in investor beliefs. The third essay focuses on the conflicting issue of home bias by looking at the impact on domestic prices of foreign trades relative to locals using high frequency data from the Korean Stock Exchange (KSE). This essay extends the work of Choe, Kho and Stulz (2004) (CKS) in three ways. First, it analyses the post-Asian financial crisis period, whereas CKS (2004) analyse the crisis (1996-98) period. Second, this essay adopts a modified version of the CKS method to better capture the aggregate behaviour of each investor-type by utilising the participation ratio in comparison to the CKS method. Third, this essay does not limit investigation to intra-day analysis but extends to daily analysis up to 50 days to observe the effect of intensive trading activity in a longer horizon than the CKS study. In contrast to the CKS findings, this paper finds that foreigners have a short-lived private information advantage over locals and trades by foreigners have a larger impact on prices using intra-day data. However, assuming investors buy-hold for up to 50 days, the local individuals provide a greater impact and more profitable returns than foreigners. Superior performance is documented for buys rather than sells.
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Maroney, Daniel Brian. "Price discovery and the influence of the ASX continuous disclosure regulation." Thesis, The University of Sydney, 2015. http://hdl.handle.net/2123/13821.
Full textAbstract:
The market model–based event study has been adopted in the United States (US) to assess damages for non-disclosure matters (Kaufman and Wunderlich 2009). In Chapter 2 of this thesis, the market model–based event study is compared to other methods used in US courts for 31 breaches of the Australian Securities Exchange (ASX) Listing Rule 3.1, which requires immediate disclosure of market-sensitive information. The results in Chapter 2 highlight that the market model–based event study assesses loss distinct to other methods, and is subsequently appropriate for assessing the loss to shareholders caused by non-disclosures that breach the ASX continuous disclosure regulations. The bivariate-GARCH(1,1) price discovery model developed and tested with ASX data in Chapter 3 represents an extension of both the Chordia, Roll and Subrahmanyam (2005) and Hasbrouck (1991) models. This model allows the causal relationships between order flow and stock returns to be assessed, and for important aspects of the price discovery process to be measured. This study also introduces an active trader order flow variable for five-minute intervals using broker identification data from the ASX. The findings highlight that active trader order flow, including institutional order flow, has a positive causal relationship with stock returns. In addition, they show that active retail order flow has a negative causal relationship with stock returns. Uniquely including a consensus surprise and time series surprise variable in one model could offer a more complete measure of the earnings expectations for a stock held by the market (Ayers, Li and Yeung 2011, Guerard 1989, Lobo 1992). No long-term post-earnings announcement drift (PEAD) has been observed for positive surprises using a combined time series and consensus surprise model. Chapter 4 presents the view that a combined model could be appropriate for ASX Guidance Note 8 earnings surprise determinations.
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Song, Duan Duan. "Price discovery, market efficiency and temporal dynamic price relationship : an empirical analysis of worldwide precious metals markets." Thesis, University of Hull, 2012. http://hydra.hull.ac.uk/resources/hull:7073.
Full textAbstract:
The aim of this research is to investigate the price discovery, market efficiency and the temporal dynamic price relationships between financial prices (futures and index) and spot price, for three of the most important precious metals, namely gold, silver and platinum. When people are concerned about the economy, prudent investors switch their investment into precious metals rather than other asset classes. Precious metals futures, thus, are used by commercial producers and users and investors of precious metals to hedge risk or to make profit on the price fluctuations. Understanding the relationship between markets should foster sensible investment decisions and improve the statistical hedging properties of precious metals. Inspired by consideration of the unique status of precious metals in the economy and limited existing empirical evidence of price relationship regarding these metals, this research attempts to contribute to the space literature on market efficiency and causality cross three categories of markets—index, futures and spot. Further it will extend the research on price relationships and interactional impacts of precious metals markets based on non-synchronous trading that connects all the major markets around the world. The findings confirm long-term equilibrium relationships between US futures/index markets and special spot markets of all three precious metals by Cointegration tests. Via VECMs, the findings also revealed that futures prices and indexes of all the tested precious metals played a dominant role in the long run, but not all of them could be the unbiased estimators of the future spot price. On the other hand, mixed results of short-term causality suggested that US futures and indices led spot prices in the majority of cases. The results from this research supported the hypothesis that futures/indices functioned in the price discovery role in both the long- and short-term, and more importantly, the findings had value implications for market users in decision-making and improving their portfolio performance on precious metal markets.
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Soffronow, Pagonidis Alexander Ivan. "Short Sale Constraints: Effects on Crashes, Price Discovery, and Market Volatility." Thesis, Jönköping University, Jönköping International Business School, 2009. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-9063.
Full textAbstract:
The recent SEC ban on short selling has presented an unrivaled opportunity to explore the effects of short selling constraints on crashes, market efficiency, and volatility. In this paper I carry out two groups of empirical tests on the individual banned stocks and a series of portfolios created from them: the first tests the hypothesis that short sale constraints increase the frequency and magnitude of crashes, by testing Hong & Stein’s (2003) model of market crashes. The second tests the hypothesis that short sale constraints reduce market efficiency, by testing Miller’s (1977) model in which stocks that are hard (or impossible) to short tend to exhibit overpricing. In regards to the first group of tests, the results are ambiguous: the frequency and magnitude of crashes increased during the ban period, while the skewness of the returns distribution of the portfolios became more negative, as expected, but these changes hold for the market as a whole, as well. On the other hand, the skewness of the returns distribution of the individual banned stocks became more positive. The second group of tests provides ample support for Miller’s model, as the results coincide with the models predictions: banning short selling leads to positive abnormal returns (overpricing) in the affected stocks. The ban is also related with a decrease in volatility relative to the market, an important result from a policy perspective.
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Jahanshahloo, Hossein. "High frequency quoting and price discovery in the foreign exchange market." Thesis, University of Leeds, 2016. http://etheses.whiterose.ac.uk/15472/.
Full textAbstract:
This thesis studies the process of price discovery in the FX market via three empirical chapters. In the presence of high frequency trading and its expansion in the FX market, the first empirical chapter contributes to the literature by analysing how high frequency quoting affects price discovery in the foreign exchange market. It finds that while an increase in dealers’ quotation speed is positively associated with short-term (within 1 minute) price discovery, this is not the case for longer-term (1-day) price discovery. These results cast doubt on the overall benefit of high frequency activities for long term price discovery in the foreign exchange market. The second empirical chapter studies the impact of economist affiliation, quoting speed, and the geographical proximity on dealers’ contribution to price discovery around macroeconomic news announcements. The findings show that dealers with affiliated economists have higher contribution to price discovery and their contribution increases by increases in the research scope of their affiliated economists. The locality of dealers and economists to news sources is also found to create an information advantage for dealers. In the presence of the manipulation of the World Markets/Reuters benchmark in the foreign exchange market, regulators need a robust and timely methodology that identifies potential manipulation in order to better direct their limited resources towards more targeted in-depth investigation. The third empirical chapter of this thesis develops a manipulation index (ManIx) which captures the potential manipulation intention of dealers during the fixing period through a unique algorithm and simulation. The application of this model is able to identify banks that are prone to potential manipulative behaviour. The results concerning the identified banks are supported by verification of these bank with disclosure of regulatory investigations. Overall, ManIx offers a decision support tool to both regulators and banks to monitor market participants for manipulative behaviour.
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Nomikos, Nikos K. "Risk management, price discovery and forecasting in the freight futures market." Thesis, City University London, 1999. http://openaccess.city.ac.uk/7749/.
Full textAbstract:
The success or failure of a futures contract is determined by its ability to provide benefits to economic agents, over and above the benefits they derive from the spot market. These benefits are price discovery and risk management through hedging. The extent to which different commodity and financial futures markets have served as efficient centres of price discovery and risk management has been the focus of considerable empirical research in the literature. The evidence however, on the BIFFEX market is very limited. This thesis therefore, by investigating these issues provides new evidence in the literature for a futures market with some unique characteristics such as the trading of a service and thin trading. Our empirical results are summarised as follows. First, the BIFFEX market performs its price discovery function efficiently since futures prices in the market contribute to the discovery ofnew information regarding both current and expected BFI prices. Second, futures prices fail to reduce market risk to the extent evidenced in other markets in the literature and, hence, the market does not perform its risk management function satisfactorily; this is thought to be the result of the heterogeneous composition of the underlying index. Sub-period analysis, corresponding to revisions in the composition of the underlying asset, indicates that the effectiveness of the BIFFEX contract as a centre for risk management and price discovery has strengthened over the recent years as a result of the more homogeneous composition of the index. This by itself indicates that the forthcoming elimination from the underlying index of the cargo routes for larger vessels, which will take place in November 1999, may have a beneficial impact on the market.
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Xiang, Wei. "Short sales and price discovery in the Hong Kong Stock Market." Thesis, University of Sheffield, 2015. http://etheses.whiterose.ac.uk/12206/.
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Wright, Jeffrey. "A Tournament Approach to Price Discovery in the US Cattle Market." DigitalCommons@USU, 2017. https://digitalcommons.usu.edu/etd/6252.
Full textAbstract:
Cattle price discovery is a process of determining the price in the market through the interactions of cattle buyers (packers) and sellers (ranchers). Locating the price discovery center or market, and estimating price interactions among the regional fed cattle markets and also among feeder cattle markets can help define a relevant fed cattle procurement market. This research identifies that the U.S. cattle markets is discovered in the futures markets, feeder cattle futures and fed futures.
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Zhang, Ying Chao. "Price discovery with asymmetric information : implication in asset pricing and corporate finance." Thesis, University of Macau, 2009. http://umaclib3.umac.mo/record=b1950303.
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Kuteesa, Annette. "Price discovery in the wholesale markets for maize and beans in Uganda." Texas A&M University, 2006. http://hdl.handle.net/1969.1/3824.
Full textAbstract:
Market information services established in 1999 were aimed at the promotion of market
efficiency through provision of information across the nation. While the responsible
bodies have improved the knowledge of prices, information exchange and flow, as a
result of competition between markets, is not known and questions of market
effectiveness still stand.
This study examines market efficiency based upon response to price signals across
Ugandan markets. We focus on information exchange for maize and beans among 16
key markets. We study weekly price data from the first week of 2000 to the last week of
2003 from each of the sixteen markets. Each commodity is studied separately using
Vector Autoregessions (VARs) and Directed Acyclic Graphs (DAGs). The two
techniques are widely used to show market risk and causal relations in time series data.
While results are presented individually for each commodity, the markets are
comparable.
In determining market efficiency, we test for stationarity of the data, explore the
magnitude of forecast error decompositions over time across markets, and observe the
patterns of communication based on DAGs. We find that markets are more efficient in
exchanging information on maize than beans. Communication of data is mostly between
markets in eastern, western, and central parts of Uganda. Overall, markets are very slow
in reacting to information in the short run.Information from the Mbale and Iganga markets, which are located in areas of high
production, is very valuable in the maize trade. However, of the two markets, it is data
from the Mbale market, located near the border with Kenya, which is of paramount
importance. Specifically, price is discovered in Mbale in the maize trade. Our results
also show the Gulu market, which is situated in an insecure zone, to be very responsive
to price signals over the long run.
In the case of beans, it is the price signals from Tororo and Jinja that cause more
disruption in most of the markets. Price is discovered in these two markets. A majority
of the markets is more affected by data from Jinja than Tororo. This segmentation in
market price discovery suggests an existing market failure. Arua and Gulu are found to
be the least responding markets in regards to price signals for beans. We do not find
information from the Kampala market to be important in either the maize or beans trade.
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Tuttle, Laura A. "Information flow in a fragmented dealer market three essays on price discovery /." Connect to this title online, 2004. http://rave.ohiolink.edu/etdc/view?acc%5Fnum=osu1089910638.
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Thesis (Ph. D.)--Ohio State University, 2004.Title from first page of PDF file. Document formatted into pages; contains x, 112 p.; also includes graphics. Includes bibliographical references (p. 73-77).
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Du, Yibing. "Price discovery of credit risk." 2009. http://hdl.handle.net/10106/1639.
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Yu, Po-Jen, and 游博任. "Graphical Chart Pattern of Price Discovery from Price Data." Thesis, 2019. http://ndltd.ncl.edu.tw/handle/6vq6cq.
Full textAbstract:
碩士國立臺灣大學
財務金融學研究所
107
In this paper, we consider the new domain of stock patterns, Pattern Discovery. Pattern Recognition try to recognize patterns in the price data, on the other hand, Pattern Discovery try to discover new patterns in the price data. We propose the algorithm of Pattern Discovery based on K-Means Clustering, and apply it to find stock price patterns before a “10% increase in 20 days” in Taiwan stock market. We observe the pattern property in both the constructing period and the test period, and also implement out-sample statistic tests. The pattern property and results in statistic tests show that the algorithm can get useful information in some special performance. Finally, we select securities to form a portfolio based on Pattern Discovery. The sharp ratio, Jensen’s Alpha and annualized return of our strategy outperform the benchmark. In conclusion, our result shows that our Pattern Discovery algorithm has great performance in any period and any cluster number in Taiwan stock market.
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Liu, Ting-Lin, and 劉廷麟. "Price discovery in Taiwan futures markets." Thesis, 2001. http://ndltd.ncl.edu.tw/handle/49178049453284441910.
Full textAbstract:
碩士淡江大學
財務金融學系
89
Title of Thesis: Price discovery in Taiwan futures markets Total Pages: 94 Name of Institute: Graduate Institute of Money, Banking and Finance, Tamkang University Graduate Date: June, 2001 Degree Conferred: Master Name of Student: Ting-Lin Liu Advisor: Wen-liang Hsieh ABSTRACT Price discovery is the process by which markets attempt to find equilibrium prices. This thesis compares the price discovery function of two similar index futures: the TAIFEX traded Taiwan Stock Exchange Capitalization Weighted Stock Index futures and the SGX traded Morgan Stanley Capital International Taiwan Index futures. We are interested in the speed of price adjustment of two futures as well as the underlying spot indices. Using high frequency and synchronized transaction data, we investigate contribution of price discovery within each of the 5 grouped markets. Results indicate that the price series in each of five groups are a cointegrated system. Estimated coefficients of the vector error correction model suggest that: 1.In category 1 (TAIFEX spot and TAIFEX futures), TAIFEX future serves the dominant price discovey function. 2.In category 2 (SGX spot and SGX futures), SGX future and its underlying spot price discovey function are about the same. 3.In category 3 (TAIFEX futures and SGX futures), price adjustment takes place in SGX future faster than TAIFEX future. 4.In category 4 (TAIFEX spot and SGX spot), SGX spot serves the dominant price discovery function. 5.In category 5 (TAIFEX spot, TAIFEX futures, SGX spot and SGX futures), four series show equal ability in price discovery. Conclusions are as follows: First, evidences support that trading cost and infrequent trading are important factors of the price discovery. Next, data frequency and synchronicity will affect the results of error correction model. It is optimal to use trade-by-trade data instead of 5-minute data. Third, the price discovery function of futures market is affected by trading mechanism and market maturity.
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Chen, Shing-Yi, and 陳興毅. "Price discovery of TTT：An arbitrage perspective." Thesis, 2014. http://ndltd.ncl.edu.tw/handle/aa78ad.
Full textAbstract:
碩士淡江大學
財務金融學系碩士班
102
ETFs have a subscription and redemption mechanism can in the primary market will purchase a basket of stocks to create ETFs, can also be redeemed in the primary market ETFs a basket of stocks. When the market price is higher than the net, this time for the phenomenon ETFs premium; Conversely, ETFs for the discount phenomenon. If subscription and redemption mechanism has been venting restrictions on the market, resulting in the exercise of subscription and redemption mechanism is not normal, we found to be venting restrictions ETFs Premiums and discounts are expanded. During the venting restrictions, subscription and redemption is not working properly, and therefore can not be arbitrage, it will be taken to the same underlying index futures arbitrage instead. We analyze the price discovery TTT and TAIEX to Hasbrouck (1995) proposed information share (Information Share) Correction share information with Lien and Shrestha (2009) proposed (Modified Information Share) for the evaluation method of price discovery discussed by venting limit the impact of the period. The empirical results show that in the limit during venting, futures are higher than the spot with a leading position. Through regression analysis shows that, TTT been venting restrictions will affect its share of poor information, as subscription and redemption mechanism can not be normal, leading to information about the reaction rate is also poor. We propose to limit the available during venting TX arbitrage.
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Lee, ChaoI, and 李兆益. "The price discovery of futures spread." Thesis, 2012. http://ndltd.ncl.edu.tw/handle/20080968181375020210.
Full textAbstract:
碩士國立清華大學
計量財務金融學系
101
In the futures market, the volumes of second-nearby contacts are often less than the volume of nearby contacts, but there is high positive correlation of price changes. Thus, the purpose on buyer-initiated and seller-initiated of market microstructure to explain futures spread, we guess there are time series or nearby contracts which lead to second-nearby contracts. To discuss the percentage of the informed trading in the market and the situation of market friction, we usually use buyer-initiated and seller-initiated to analyze probability of informed trading and market friction , and also estimate realized volatility or trading behavior for different traders. In the past, we use tick rule and quote rule to determine buyer-initiated and seller-initiated. Lee and Ready(1991) and Ellis, Michaely and O’Hara(2000) combine two rules and increase the classification success rate. By Empirical simulation, we decide to use Lee and Ready(1991) to determine buyer-initiated and seller-initiated , and we use the method to arrange tick data of futures spread research. First, we use buyer-initiated and seller-initiated series of nearby and second-nearby contracts to explain price change. Huang and Chou(2007)combine buyer-initiated and seller-initiated to explain order imbalance(OI) series. Therefore, we also use this method to the absolute value of estimation of futures spread. Besides, we try to use buyer-initiated and seller-initiated to interpret to futures spread change between these two methods.
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Kao, Shih-Hsuan, and 高士軒. "Price-Volume Relationship: Is Volume a Leading Indicator of Price Discovery." Thesis, 2008. http://ndltd.ncl.edu.tw/handle/85055679510533105472.
Full textAbstract:
碩士逢甲大學
財務金融學所
96
Stock is one of the popular instruments in financial markets. The purpose for investors to invest in stocks is to obtain profit. The price-volume relationship is often used as an important indicator of investment decision making for the investors. There are many scholars investigating the price-volume relationship in the past, but these models did not say how the stock prices behaved, reverse or rebound, when the volume dramatically boost. The purpose of this thesis is to explore the price-volume relationship, especially focusing on whether volume can be used as a leading indicator of price discovery. The data cover the period from 2005 to 2007 in the Taiwan stock market. This thesis uses the OLS regression and t-test to observe the relationship between price and volume. I find that when the volume boosts dramatically, the probability that reverses or rebounds of stock prices become increased. The inverse of this statement is also true, i.e., reverses or rebounds of stock prices are often companied by volume boosts. These results will provide the important and useful information for the investors when they make trading decisions.
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Lin, Juen-Fwu, and 林振福. "Price Discovery in Taiwan 50 Index Futures." Thesis, 2004. http://ndltd.ncl.edu.tw/handle/14447267920768622484.
Full textAbstract:
碩士國立中央大學
財務金融學系碩士在職專班
92
Taiwan Stock Exchange Corporation wants to increase the liquidity of the market and constructs a healthy financial environment, so cooperating with FTSE to arrange a simple and typical index, called “TSEC Taiwan 50 Index”. The fifty stocks include the representative firms in several industries of Taiwan stock market. Base on this index, Taiwan Stock Exchange Corporation promotes several derivates such as exchange traded funds and futures. The purpose of this thesis is to use time-series model to analyze the price discovery between Taiwan 50 Index Exchange Traded Fund, Taiwan 50 Index and Taiwan 50 Index Future, and to provide information for the Authority in product design in the coming years. In our empirical evidence, there products have lead-lag relationship, but there is little difference in strength. However, it still can be seen as a signal when people decide to invest, so this relationship is so-called price discovery.
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"Price discovery in Hong Kong futures markets." 2005. http://library.cuhk.edu.hk/record=b5892608.
Full textAbstract:
Choy Siu Kai.Thesis (M.Phil.)--Chinese University of Hong Kong, 2005.
Includes bibliographical references (leaves 35-37).
Abstracts in English and Chinese.
Chapter Chapter 1 --- Introduction --- p.1-2
Chapter Chapter 2 --- Literature Review --- p.3-9
Chapter Chapter 3 --- An Overview of Hong Kong Security Market and Data Description --- p.10-18
Chapter Chapter 4 --- Methodology --- p.19-24
Chapter Chapter 5 --- Futures and Mini Futures Results --- p.25-28
Chapter Chapter 6 --- Index and Futures Contracts Results --- p.29-32
Chapter Chapter 7 --- Conclusion --- p.33-34
References --- p.35-37
Appendix --- p.38-40
Tables --- p.41-52
Graphs --- p.53-57
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Wang, Rou-Wen, and 王柔文. "Price Discovery of TTT ：A Liquidity Perspective." Thesis, 2014. http://ndltd.ncl.edu.tw/handle/s8a2z9.
Full textAbstract:
碩士淡江大學
財務金融學系碩士班
102
This paper investigates the relationship between price discovery and liquidity on the Taiwan 50 ETF (TTT) and underlying stocks based on Hasbrouck (1995)`s information share model. The sample period extends from January 2, 2007 to December 31, 2010.This period is dividend into four sub-periods: the first two sub-periods are the short sale restrictions in 2008 financial tsunami and the non-constraint period. The others are short sale restrictions before ex-dividend date and not be constrained period. This paper employs the bid-ask spread as liquidity variable, the larger spread means liquidity decrease. The empirical result indicates that market value of TTT is weaker price discovery than the net asset value (NAV) of underlying stocks in short sales constraints of 2008 financial tsunami. The market value of TTT is stronger price discovery than the NAV of underlying stocks. As increase in the spread accompanies with a decrease in the information share, implying that there is a negative relationship between spread and information share. On the other hands, liquidity and information share are positive relationship.
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lin, gow-ping, and 林國平. "price discovery function of stock index futures." Thesis, 1997. http://ndltd.ncl.edu.tw/handle/19262902131392136278.
Full textAbstract:
碩士國立台灣工業技術學院
管理技術研究所
85
AbstractHedge and price discovery are major functions of futures. The research for price discovery function of futures always focuses on whether futures prices can forecast spot prices efficiently. The most popular methodology is to examine the causality (lead-lag) relationship between futures prices and spot prices.This thesis employs the unit root test﹑ cointegration﹑error correction model ﹑traditional Granger causality test and Garbade & Silber model to examine the price discovery function of stock index futures.Daily closing price of S&P 500 stock index futures and Nikkei 225 stock index futures were collected as samples from Jan. 1996 to Dec. 1996.The empirical results can be summarized as follows:1﹑All of price series are I(1).2﹑Both S&P 500 and Nikkei 225 stock index, Futures prices are cointegrated with spot prices in the long- run.3﹑Using error correction model to examine causality relationship find that futures prices lead spot prices significantly in both stock indexes.4﹑Using traditional Granger causality test and Garbade & Silber model also finds that futures prices lead spot prices.
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Chen, Chia-Kuo, and 陳佳國. "Price Discovery with Ordering Robust Information share." Thesis, 2008. http://ndltd.ncl.edu.tw/handle/14172654201483133429.
Full textAbstract:
碩士元智大學
財務金融學系
96
Price discovery has long been an active research area in empirical finance since it can identify the leading sources of information disclosure among different markets that trade the same or similar financial assets and thus helps in investments. The information share proposed by Hasbrouck (1995) and common factor approach proposed by Gonzalo and Granger (1995) are undoubtedly the most popular ones among many others for price discovery, along with their own merits and demerits. Hasbrouck''s approach is persuasive than Gonzalo and Granger''s approach since it allows for short-term dynamic information in assessing price discovery. However, once the innovations among markets are correlated, the obtained information shares are not invariant to the ordering of the variables. Though Gonzalo and Granger''s approach does not suffer from such ordering problems, their approach cares only information from permanent component and neglects completely the valuable information on market interactions from transitory components. This paper uses the perspective of generalized impulse response function from Koop, Pesaran, and Potter (1996) and Pesaran and Shin (1998) to devise a new method for calculating information share. The new approach goes without using Cholesky decomposition and thus does not suffer from the ordering problem inherited in Hasbrouck (1995). Besides, this paper also discusses the modified information share devised by Lien and Shrestha (2008). Finally, we will use several examples and an empirical application to verify the feasibility and comparative benefits of using the new approach over the other methods in price discovery.
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SHI, XI-AN, and 史習安. "The price discovery of Taiwan stock market." Thesis, 1990. http://ndltd.ncl.edu.tw/handle/40483661880933531293.
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Chiu, Chi-Chen, and 邱奇珍. "Essays on Market Transparency and Price Discovery." Thesis, 2010. http://ndltd.ncl.edu.tw/handle/85117733267659073624.
Full textAbstract:
博士淡江大學
財務金融學系博士班
98
On March 25, 2002, Stock Exchange of Hong Kong introduces a new arrangement of extending trading session before open. The purpose of this study is to examine the impact of increasing transparency on bid-ask spreads, market depth, and price efficiency. The empirical results suggest that the intraday variations in spread display similarly J-shaped patterns, but the market depth shows a reverse J-shaped pattern. We also find that dollar and percentage quoted spread significant decrease as the trading activity increases. With the finding that wider spread after the new introduction, we suggest the asymmetric information component of spread may increase significantly following the open limit book of preopening trading session. The measurement of the amount of price discovery during preopening increases as the trading activity increases. Final, we also show in the context of price discovery process that the continuously increasing of the estimated slope of unbiasedness regression consists with more information incorporated into the price through the trading process.
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Li, Meng-yu, and 李孟諭. "The effects of price limit narrowing on price discovery in Taiwan derivatives." Thesis, 2010. http://ndltd.ncl.edu.tw/handle/95476370308125068028.
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碩士中國文化大學
國際企業管理研究所
98
This research focuses on the government policies against the 2008 Financial Cri-sis. The government implemented price limits narrowing from OCT 13, 2008 to OCT 24, 2008. We investigate the price discovery between Taiwan Futures and Options. The Vector Auto-Regression Model and Ordinary Least-Squares Model are used to examine the lead-lag relationships between these two markets. The findings are as follows: First, before and after the price limits narrowing period, the Futures and Options markets lead each other in the process of price discovery. And there exists contempo-rary relationship in these two markets. Second, during the price limits period, the price discovery process of Futures and Options markets was interrupted and their information could not be reflected to each other. Therefore, the price limits narrowing policy may have influence on market effi-ciency. It seems not to be able to stabilize the Taiwan markets.
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Shih, Chieh-Jen, and 施介人. "Price Discovery in Taiwan Stock Index Derivatives Markets." Thesis, 2004. http://ndltd.ncl.edu.tw/handle/55455794684908510223.
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碩士長庚大學
企業管理研究所
92
The purpose of this study is to examine the lead-lag relationship among stock index, index futures and index options markets in Taiwan. High-frequency intraday data of the three markets described above are collected, transformed into rates of return and then analyzed by vector autoregression (VAR), Granger causality and variance decomposition methodologies. The results show that the index futures and in-the-money options clearly lead over the stock index based on the efficiency of information transmission. In aspect of the index futures, the result shows that the lead of index futures over in-the-money options is slightly stronger than the lead of in-the-money options over index futures. The interrelations among options show as follows: the in-the-money options lead the out-of-the-money options, the in-the-money put option leads the in-the-money call option, and the out-of-the-money call option leads the out-of-the-money put option. The results from Granger causality test show the feedback relationships among stock index, index futures and index options, which are consistent with the results from VAR model. According to the results from variance decomposition, the index futures return and in-the-money put option return both have strong exogeneity, in addition, the index futures has higher explanatory power than the in-the-money put option on the stock index.
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Shih, YaChing, and 施雅菁. "Price discovery in Mini Taiwan stock index futures." Thesis, 2002. http://ndltd.ncl.edu.tw/handle/42046012033052716818.
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碩士淡江大學
財務金融學系
90
This dissertation demonstrates the price discovery of the Mini Taiwan stock index futures (MTX). It evaluates that ability compared to Taiwan stock index futures (TX) and Taiwan stock index (TS). The research covers totally 48,870 minute-to-minute transactions, dating widely from 4/10/2001 to 12/31/2001. Besides showing their long term trends for price with Cointegration Model, this research also indicate their strength for price discovery with VECM Model, and portrays the short-term price relationship between markets. The results show that the trends and relationships between TS、 TX and MTX are long-termed, stabled and balanced. In all the modals and classifications, the prices discovery for TX is the most outstanding of the three. It dominates in the long-term relationships as well as significantly influents other market in short-term dynamic relationships. The price discovery of MTX is obviously worse than TX, and generally ties to TS. The inferiority might originate from its high transaction cost, low market fluency, and low participant maturity. The prevalence of TX might also discourage the information of MTX from being revealed to the public. The results are also in accordance with the hypotheses that transaction cost affects price discovery. The lower the transaction cost, the faster the market reaction to new information.
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Chou, Ting-Hsuan, and 周廷軒. "Research in Price Discovery of Taiwan's CBBC Market." Thesis, 2016. http://ndltd.ncl.edu.tw/handle/72886593678834217358.
Full textAbstract:
碩士中國文化大學
財務金融學系
104
This thesis mainly explores the impact of CBBC market transactions on the price discovery by studying CBBC transaction data at the frequency of 30 minutes and selecting the data of the individual share between 2011 and 2012 as samples. The main research methods applied in this thesis include Unit Root Test, Cointegration Test and Vector Error Correction Model. In the end, it adopts the Information Sharing Ratio (information sharing ratio after correction) put forward by Hasbrouck (1995) and revised by Lien and Shrestha (2009) to evaluate the capabilities of price discovery in CBBC market transactions and spot market. The research findings show that Callable Bull and Bear Contract have different capabilities of the price discovery from spot market where the Callable Bull has better capabilities of the price discovery than spot market and Bear Contract has worse capabilities of the price discovery than spot market. The reason lies in that CBBC is new derivative product emerging in the financial market in recent years whose transaction frequency is impossible to be as high as other derivative products. In addition, with the issuing of Bear Contract and shortage of security sources in Taiwan market, the CBBC issued is too few which results in the inefficiency in the transmission of information in the market.
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Liao, Chih-Jou, and 廖至柔. "Price discovery in CNY, CNH and NDF markets." Thesis, 2014. http://ndltd.ncl.edu.tw/handle/28399333312285985072.
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碩士銘傳大學
國際企業學系碩士班
102
The People’s Bank of China (PBC) declared that switching of the RMB from a fixed to managed-floating exchange rate on July twenty-first 2005. In the past eight years, the appreciation of the RMB against the U.S. dollar over 30%. To accelerate the process of internationalization of the RMB, China not only open up the offshore RMB settlement but also sign the currency swap agreements with all major countries. With RMB trades on onshore and offshore spot market and offshore NDF market. The relationship between the three different kinds of exchange rate can reflect the efficient of the three markets. If the market is efficient, then the price discovery function will be able to bring into full play. We select onshore and offshore spot exchange rate of RMB against U.S. dollar and the NDF exchange rate. We use the Granger causality test and Hasbrouck’s information share model to measure the price discovery basis between the three markets. Our research shows that under the Granger causality test, CNY vs. CNH, CNH vs. NDF and CNY vs. NDF they all have the feedback relationship. It means that any of two markets will affect each other. Also, under the Hasbrouck information share model, the result shows that the CNY market has more information than CNH and NDF markets.
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Tien, Chih-Wei, and 田志偉. "Price Discovery and Information Transmission of ETF Options." Thesis, 2008. http://ndltd.ncl.edu.tw/handle/90333861965635445089.
Full textAbstract:
碩士國立交通大學
財務金融研究所
96
This thesis investigates the price discovery and the procedure of information transmission between ETF and ETF options. And the put-call parity approach is applied to calculate the implied spot prices of the options. The first part of this thesis discusses the power of price discovery of ETF options in the U.S. market and emerging markets separately. The second part compares SPDRs options and S&P 500 index options, two of the derivatives of S&P 500 index, by intraday data to observe their correlations. The results of cointegration test, VECM, and the price discovery models (PT and IS) imply that the ETF options market in U.S. grows rapidly in recent years and shows higher contribution to the price discovery function. Contrarily, the ETF options of emerging markets is of smaller scales, thus the spot market of ETF is dominant. Moreover, the high correlation of SPDRs options and S&P 500 index options reveals their joint long-term trend and bi-directional feedback. The tradability of the underlying assets and the characteristics of the contract make SPDRs options a significantly better contribution in the price discovery function. Hence the existence of SPDRs options is beneficial to the completeness and the efficiency of the overall market.