Abstract

http://ssrn.com/abstract=1957078
 
 

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Developing Price Discovery Measures Within a Volatility-Based Model (Third Draft)


Guangli Lu


Louisiana State University

10 26, 2012


Abstract:     
I propose a model to uniquely and dynamically estimate a market’s information share. My model can also recover short run information flow’s effect on information share. After accounting for that effect, I propose a method to estimate the portion of information to which a market first reacts. The market that reacts quickly may not interpret well, as found in the subsequent study on Chinese stock index and index futures markets. The outcome suggests a dual role of liquidity. While high liquidity makes the futures market react faster to most of the information (62.5%), it also makes the futures prices noisier, and lower its contribution to information interpretation (34.4%).

Number of Pages in PDF File: 26

Keywords: price discovery, unique information share, time dependent information share, volatility spillover adjusted information share

JEL Classification: C32, C51, G13, G14

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Date posted: November 9, 2011 ; Last revised: October 13, 2013

Suggested Citation

Lu, Guangli, Developing Price Discovery Measures Within a Volatility-Based Model (Third Draft) (10 26, 2012). Available at SSRN: http://ssrn.com/abstract=1957078 or http://dx.doi.org/10.2139/ssrn.1957078

Contact Information

Guangli Lu (Contact Author)
Louisiana State University ( email )
Business Complex, 2326
Baton Rouge, LA 70802
United States
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