How Smooth Is Price Discovery? Evidence from Cross-listed Stock Trading

Chen, Haiqiang; Choi, Paul Moon Sub; Hong, Yongmiao

doi:10.2139/ssrn.1912954

Cited by 11 publications

(13 citation statements)

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“…Solnik, ; Bacidore and Sofianos, ). However, while the primary exchange dominates, in agreement with the results of, for example, Chen, Choi and Hong (), and Eun and Sabherwal (), the contribution of the other exchanges is still important. Indeed, the contribution of the XETRA exchange (Germany‐based) is almost as high as for the primary exchange with a PIS of 22.4%, and four of five UK exchanges contribute around 10% each.…”

Section: Resultssupporting

confidence: 87%

A Factor Analytical Approach to Price Discovery

2017

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Existing econometric approaches for studying price discovery presume that the number of markets are small, and their properties become suspect when this restriction is not met. They also require making identifying restrictions and are in many cases not suitable for statistical inference. The current paper takes these shortcomings as a starting point to develop a factor analytical approach that makes use of the cross‐sectional variation of the data, yet is very user‐friendly in that it does not involve any identifying restrictions or obstacles to inference.

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Section: Resultssupporting

confidence: 87%

A Factor Analytical Approach to Price Discovery

2017

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“…an increasing CDS market spread and/or decreasing bond market spread) is associated with a lower CDS market information share. This conclusion is in line with the positive link between liquidity and contributions to price discovery derived in previous studies (see Kehrle and Peter (2013); Chen et al (2013)). …”

Section: Information Share Determinantssupporting

confidence: 92%

Price discovery in the markets for credit risk: a Markov switching approach

Dimpfl

Peter

2016

Studies in Nonlinear Dynamics &Amp; Econometrics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Terms of use: Documents in AbstractWe examine price discovery in the Credit Default Swap and corporate bond market. By using a Markov switching framework we are able to analyze the dynamic behavior of the information shares during tranquil and crisis periods. The results show that price discovery takes place mostly on the CDS market. The importance of the CDS market even increases during the more volatile crisis periods. According to a cross sectional analysis liquidity is the main determinant of a market's contribution to price discovery. During the crisis period, however, we also find a positive link between leverage and CDS market information shares. Overall the results indicate that price discovery measures and their determinants change during tranquil and crisis periods, which emphasizes the importance of more flexible frameworks, such as Markov switching models.

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“…VAR models were introduced (e.g., Stoll & Whaley, 1990) and soon thereafter replaced by error correction (ECM) models (e.g., Wahab & Lashgari, 1993). An obvious candidate is a smooth transition error correction (STECM) model as applied by Taylor, van Dyck, Franses, and Lucas (2000), Anderson and Vahid (2001), Tse (2001), Fung and Yu (2007), and Chen, Sub Choi, and Hong (2013). This is unlikely to be the case, however.…”

Section: Introductionmentioning

confidence: 99%

“…If, on the other hand, traders are heterogeneous with respect to the transaction costs they face, a less restrictive model is warranted. An obvious candidate is a smooth transition error correction (STECM) model as applied by Taylor, van Dyck, Franses, and Lucas (2000), Anderson and Vahid (2001), Tse (2001), Fung and Yu (2007), and Chen, Sub Choi, and Hong (2013).…”

Section: Introductionmentioning

confidence: 99%

A Partially Linear Approach to Modeling the Dynamics of Spot and Futures Prices

Gaul

Theissen

2014

Journal of Futures Markets

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This paper considers the dynamics of spot and futures prices in the presence of arbitrage. A partially linear error correction model is proposed where the adjustment coefficient is allowed to depend nonlinearly on the lagged price difference. The model is estimated using data on the DAX index and the DAX futures contract. We find that the adjustment is indeed nonlinear. The linear alternative is rejected. The speed of price adjustment is increasing almost monotonically with the magnitude of the price difference. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:371–384, 2015

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How Smooth Is Price Discovery? Evidence from Cross-listed Stock Trading

Cited by 11 publications

References 0 publications

A Factor Analytical Approach to Price Discovery

A Factor Analytical Approach to Price Discovery

Price discovery in the markets for credit risk: a Markov switching approach

A Partially Linear Approach to Modeling the Dynamics of Spot and Futures Prices

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