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Interdealer inference and price discovery
Author(s) -
Huang Tzuman,
Locke Peter
Publication year - 2008
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.20292
Subject(s) - price discovery , futures contract , inference , economics , product (mathematics) , financial economics , econometrics , microeconomics , computer science , mathematics , artificial intelligence , geometry
Futures floor dealers are investigated in terms of their joint product of price discovery. A vector error correction model is estimated using floor trader proprietary prices, examining the resulting information shares and common factor components. More active dealers are significant price leaders, with only one fifth of the traders responsible for a significantly higher degree of price discovery. Price leadership is more significant in both volatile and falling markets, when information is perhaps more valuable. It is also found that the most active floor traders generally trade at the same time and in the same direction. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28: 131–154, 2008