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Author: Bingcheng Yan
Publisher:
ISBN:
Category :
Languages : en
Pages : 65
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Book Description
In this paper we propose a new approach for the econometric analysis of the dynamics of price discovery using a structural cointegration model for the price changes in arbitrage linked markets. Our methodology characterizes the dynamics of price discovery based on the impulse response functions from an identified structural cointegration model, and we measure the efficiency of a market's price discovery by the absolute magnitude of cumulative pricing errors in the price discovery process. We apply our methodology to investigate the extent to which the US dollar contributes to the price discovery of the yen/euro exchange rate. Our results show that substantial price discovery of JPY/EUR occurs through the dollar, and that the efficiency of the dollar's price discovery is positively related to the relative liquidity of the dollar markets versus the cross rate market.
Author: Bingcheng Yan
Publisher:
ISBN:
Category :
Languages : en
Pages : 65
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Book Description
In this paper we propose a new approach for the econometric analysis of the dynamics of price discovery using a structural cointegration model for the price changes in arbitrage linked markets. Our methodology characterizes the dynamics of price discovery based on the impulse response functions from an identified structural cointegration model, and we measure the efficiency of a market's price discovery by the absolute magnitude of cumulative pricing errors in the price discovery process. We apply our methodology to investigate the extent to which the US dollar contributes to the price discovery of the yen/euro exchange rate. Our results show that substantial price discovery of JPY/EUR occurs through the dollar, and that the efficiency of the dollar's price discovery is positively related to the relative liquidity of the dollar markets versus the cross rate market.
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: Jacob Leshno
Publisher:
ISBN:
Category :
Languages : en
Pages : 31
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Book Description
We study the dynamics of price discovery in decentralized two-sided markets. There exist memoryless dynamics that converge to the core in which agents' actions depend only on their current payoff. However, we show that for any such dynamic the convergence time can grow exponentially in the population size. We present a natural dynamic in which a player's reservation value provides a summary of her past information and show that this dynamic converges to the core in polynomial time in homogeneous markets.
Author: Christos I. Giannikos
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the dynamics of price discovery among three informationally connected markets: the stock market, the bond market, and the CDS market. The recent financial crisis in the US has provided a perfect natural experiment to study the impact of stress on price discovery. We study daily stock prices, CDS spreads, and bond spreads over a four-year period before and during the crisis (2005-2008) for 10 US financial firms. The strong cointegrated relationship between the CDS spread and bond spread and the dominant role of CDS spread in price discovery are stable throughout the sample period. Before the crisis, the stock market played a dominant role in price discovery. During the crisis, we document a much weaker role of the stock market while the CDS market has taken on a more important role becoming the dominant source of information during the financial crisis. We also propose two behavioral explanations for our empirical finding.
Author: Joel Hasbrouck
Publisher: Oxford University Press
ISBN: 0198041306
Category : Business & Economics
Languages : en
Pages : 209
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Book Description
The interactions that occur in securities markets are among the fastest, most information intensive, and most highly strategic of all economic phenomena. This book is about the institutions that have evolved to handle our trading needs, the economic forces that guide our strategies, and statistical methods of using and interpreting the vast amount of information that these markets produce. The book includes numerous exercises.
Author: Cristina Mabel Scherrer
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Avinash
Publisher:
ISBN:
Category :
Languages : en
Pages : 11
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Book Description
We investigate the effect of economic crises on the direction of information flow and price discovery efficiency of spot and futures market by considering the near month Nifty50 index futures and its corresponding spot index. The period of study commences from January, 2004 to December, 2015 and the study period is further classified as pre-crisis, crisis and post crisis with four years band to measure the change in price discovery dynamics using VECM and the Schwarz & Szakmary common factor measures. The study findings not only highlight slight significant impact of economic crises on price discovery dynamics but also upheld the dominance of spot in price discovery process. We also find evidence on the gradual increase in common factor weights of futures and varying direction of information transmission during sub-sample study periods.
Author: Bingcheng Yan
Publisher:
ISBN:
Category : Foreign exchange market
Languages : en
Pages : 96
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Book Description
Author: Isabel Figuerola-Ferretti
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This article provides a method of quantifying price discovery in commodity markets. By price discovery we mean the process by which commodity markets attempt to identify permanent changes in equilibrium transaction prices. We are interested in commodity markets in particular the dynamics of commodity prices and the existence of a liquid futures market. Our work departs from the previous literature in that it applies Gonzalo-Granger (GG) decomposition to show that future prices are quot;information dominantquot; in relation to spot prices, in the sense that they are the most important contributors to the revelation of the common factor. Unlike in the Hasbrouck methodology the GG decomposition offers a basis for robust estimation and testing despite the presence of high correlation across disturbances. The GG method, like the Hasbrouck method is appropriate to the study of price discovery in that only a minimal structure is imposed on the dynamics of the price series. We estimate and test common factor components attributable to spot and future (3 month) prices within 5 metals traded in the London Metal Exchange (LME). This involves our demonstrating that spot and future metal prices are cointegrated, suggesting that within the cost-of-carry framework the price differential is stationary. Our results show that the future price is infomationally more efficient for the most liquid LME traded metal contracts.
Author: Bart Frijns
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
We analyze price discovery dynamics for Canadian companies cross-listed on the NYSE from January 2004 to January 2011. We employ a structural vector autoregression to assess the interactions between price discovery, liquidity and algorithmic trading activity. We observe that over time, the U.S. market is gaining dominance in terms of price discovery. Improvements in liquidity increase a market's contribution to price discovery, and vice versa. We find that algorithmic trading activity is negatively related to price discovery, indicating negative externalities of high-frequency trading. These results are robust to regulatory changes in the U.S. and fragmentation in the Canadian financial markets.
