Price Discovery Efficiency and Permanent Information Impounding on Nyse Euronext Paris

49 Pages Posted: 30 Mar 2012

See all articles by Frederick H. deB. Harris

Frederick H. deB. Harris

Wake Forest University; Capital Markets CRC Limited (CMCRC)

Michael J. Aitken

Macquarie Graduate School of Management

Elisa-Maree Di Marco

affiliation not provided to SSRN

Date Written: March 26, 2012

Abstract

Since European trading now traverses national boundaries, and MTFs are rampant, how have the stock price dynamics changed? Analysing the execution channels NYSE Euronext Paris, Chi-X and BATS in CAC40 stocks, we compare metrics of market efficiency pre/post-MiFID and provide insight into the price discovery implications of high frequency trading. Utilizing Hasbrouck’s Information Share and Gonzalo and Granger’s Common Factor Share in a unifying framework, we distinguish price discovery efficiency from permanent information impounding. Although the primary exchange NYSE Euronext Paris has lost only 10% of the information impounding to the MTFs, these alternative mechanism designs exhibit remarkably high price discovery efficiency.

Keywords: price discovery, Euronext, Chi-X, MTF, MiFID, fragmentation, permanent information impounding, price discovery efficiency

JEL Classification: G12

Suggested Citation

Harris, Frederick (Rick) H. deB. and Aitken, Michael J. and Di Marco, Elisa-Maree, Price Discovery Efficiency and Permanent Information Impounding on Nyse Euronext Paris (March 26, 2012). Available at SSRN: https://ssrn.com/abstract=2029338 or http://dx.doi.org/10.2139/ssrn.2029338

Frederick (Rick) H. deB. Harris (Contact Author)

Wake Forest University ( email )

2601 Wake Forest Road
Babcock Graduate School of Management
Winston-Salem, NC 27109
United States
336-758-5112 (Phone)

Capital Markets CRC Limited (CMCRC) ( email )

Level 3, 55 Harrington Street
Sydney, 2000
Australia

Michael J. Aitken

Macquarie Graduate School of Management ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Elisa-Maree Di Marco

affiliation not provided to SSRN ( email )

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