报告题目:Common and Market-Specific Information Flows in Multi-Market Trading
When the same asset is simultaneously traded in multiple markets, it is important to measure each market’s contribution to the price discovery process, i.e. the process that incorporates economic information into asset value. In market microstructure literature, it is commonly assumed that price-relevant information is incorporated into asset value sequentially across multiple markets. This assumption becomes questionable as technological developments allow investors to send orders simultaneously to multiple markets.
In this study, we allow all markets trading the same asset to simultaneously react to public information arrivals. We estimate the common and market-specific information flows embedded in the price movements of each market. We show that the common information flow accounts for over 90% of permanent price changes at 1 second time interval. It accounts for 85% of permanent price change at 0.1 second interval. Despite the increase in the number of trading venues, our evidence indicates that the US equity markets are highly integrated and pricing is dominated by common information shocks. The market-specific information shares have relatively large daily variations.
Jianxin Wang received his B.sc. from Tsinghua University in Beijing, China, and his Ph.D. in economics from Northwestern University in the United States. He worked as a financial analyst in Chicago before joining the University of New South Wales. He has held visiting positions in Yonsei University, South Korea, the Capital Market and Financial Institution Supervisory Agency of Indonesia, Beijing and Nankai Universities in China, and the Central Economic-Mathematical Institute, Academy of Sciences, USSR. He joined UTS in April 2011.