A New Measure of Price Discovery in Financial Markets PDF Download
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Author: Riccardo De Blasis
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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Book Description
We propose a new measure to establish price leadership among multiple related price series using a Multivariate Markov Chain. This new measure, the Price Leadership Share (PLS), can easily be calculated when prices are related but not fully cointegrated or with more than two price series simultaneously, offering advantages over the existing price discovery measures. In addition, we propose a price leadership concentration index for comparative analysis. The measure is tested on six gold contracts, including spot, futures, and ETF, over a two-year period. Results show that gold futures contracts, mainly the CME contract, have a major role in price discovery confirming the previous literature's findings. Overall, the PLS measure overcomes the limits of other price discovery measures. Finally, a Python implementation of the PLS is reported in the Appendix.
Author: Riccardo De Blasis
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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Book Description
We propose a new measure to establish price leadership among multiple related price series using a Multivariate Markov Chain. This new measure, the Price Leadership Share (PLS), can easily be calculated when prices are related but not fully cointegrated or with more than two price series simultaneously, offering advantages over the existing price discovery measures. In addition, we propose a price leadership concentration index for comparative analysis. The measure is tested on six gold contracts, including spot, futures, and ETF, over a two-year period. Results show that gold futures contracts, mainly the CME contract, have a major role in price discovery confirming the previous literature's findings. Overall, the PLS measure overcomes the limits of other price discovery measures. Finally, a Python implementation of the PLS is reported in the Appendix.
Author: Lucy F. Ackert
Publisher: South Western Educational Publishing
ISBN: 9780538752862
Category : Investments
Languages : en
Pages : 0
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Book Description
The book begins by building upon the established, conventional principles of finance that you've have already learned in your principles course. The authors then move into psychological principles of behavioral finance, including heuristics and biases, overconfidence, emotion and social forces. You immediately see how human behavior influences the decisions of individual investors and professional finance practitioners, managers, and markets. You also gain a strong understanding of how social forces impact individuals' choices. The book clearly explains what behavioral finance indicates about observed market outcomes as well as how psychological biases potentially impact the behavior of managers. The book's solid academic approach provides opportunities for you to utilize theory and complete applications in every chapter as you learn the implications of behavioral finance on retirement, pensions, education, debiasing, and client management. The book spends a significant amount of time examining how today's practitioners can use behavioral finance to further their professional success.
Author: Syed Galib Sultan
Publisher:
ISBN:
Category :
Languages : en
Pages : 87
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Book Description
Price Discovery is the process by which new information is impounded into asset prices through trading activity. A market is considered to contribute more to price discovery if it is the first to capture new information regarding the fundamental value of an asset. Hasbrouck's (1995) information share (IS) is the most widely used measure for price discovery contribution even though there is a well-documented concern with identification: its dependence on the ordering of the variable in the price vector and its non-uniqueness. In the first chapter, we propose a new measure, "Price Discovery Share" (PDS) that is closely related to IS and resolves the identification problems inherent in the IS method. PDS is motivated by a widely used method in risk management literature called the "risk-budgeting" or additive decomposition of portfolio volatility. Using simulated data based on different structural asset pricing models, we find that PDS measures the structural price discovery contribution more accurately than IS. In the second chapter, we apply Price Discovery Share (PDS) to investigate the "duplication of Exchange-Traded Funds (ETFs)" phenomenon, a recent institutional trend in financial markets. We show that although there are multiple ETFs tracking the S&P 500 index, one specific S&P 500 ETF ('SPY') always contributes more to price discovery than the rest. We also find that PDS, unlike Information Share (IS), is robust to the use of intra-day market price data sampled at different frequencies. In the third chapter, we study the effect of bond Exchange-traded funds (ETFs) and bond mutual funds on the liquidity of U.S. corporate bonds. Depending on the liquidity measure used, we find different statistically significant results. ETF ownership has a positive impact on their underlying corporate bonds liquidity when we only consider bonds that are already bought and held by ETFs. Bond mutual funds ownership is found to play a positive impact on the liquidity of high yield corporate bonds.
Author: Frank de Jong
Publisher: Cambridge University Press
ISBN: 1139478443
Category : Business & Economics
Languages : en
Pages : 209
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Book Description
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.
Author: Abdourahmane Sarr
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 72
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Book Description
This paper provides an overview of indicators that can be used to illustrate and analyze liquidity developments in financial markets. The measures include bid-ask spreads, turnover ratios, and price impact measures. They gauge different aspects of market liquidity, namely tightness (costs), immediacy, depth, breadth, and resiliency. These measures are applied in selected foreign exchange, money, and capital markets to illustrate their operational usefulness. A number of measures must be considered because there is no single theoretically correct and universally accepted measure to determine a market's degree of liquidity and because market-specific factors and peculiarities must be considered.
Author: Marc Levinson
Publisher: The Economist
ISBN: 1541742516
Category : Business & Economics
Languages : en
Pages : 250
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Book Description
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.
Author: H. Kent Baker
Publisher: John Wiley & Sons
ISBN: 1118421485
Category : Business & Economics
Languages : en
Pages : 758
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Book Description
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.
Author: Deniz Ozenbas
Publisher: Springer Nature
ISBN: 3030748170
Category : Business enterprises
Languages : en
Pages : 111
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Book Description
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.
Author: Jean-Philippe Bouchaud
Publisher: Cambridge University Press
ISBN: 1108639062
Category : Science
Languages : en
Pages : 464
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Book Description
The widespread availability of high-quality, high-frequency data has revolutionised the study of financial markets. By describing not only asset prices, but also market participants' actions and interactions, this wealth of information offers a new window into the inner workings of the financial ecosystem. In this original text, the authors discuss empirical facts of financial markets and introduce a wide range of models, from the micro-scale mechanics of individual order arrivals to the emergent, macro-scale issues of market stability. Throughout this journey, data is king. All discussions are firmly rooted in the empirical behaviour of real stocks, and all models are calibrated and evaluated using recent data from Nasdaq. By confronting theory with empirical facts, this book for practitioners, researchers and advanced students provides a fresh, new, and often surprising perspective on topics as diverse as optimal trading, price impact, the fragile nature of liquidity, and even the reasons why people trade at all.
Author: Martin D. D. Evans
Publisher: Princeton University Press
ISBN: 1400838843
Category : Business & Economics
Languages : en
Pages : 561
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Book Description
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
