Excess demand and price formation during a Walrasian auction

James Eaves, Michael Melvin and Sandeep Mohapatra

Journal of Empirical Finance, 2008, vol. 15, issue 3, 533-548

Abstract: We conduct a detailed analysis of the relationship between excess demand and the convergence of price to equilibrium during a real-world Walrasian auction, paying special attention to the size and speed of the price adjustment. Using data from the Tokyo Grain Exchange (TGE), we first show that because auctions for the various futures contracts occur sequentially, information becomes more evenly dispersed across traders as an auction sequence progresses. Then we show that excess demand is positively correlated with both the eventual price change and the speed with which price adjusts. As information becomes more evenly dispersed, the strength of these relationships weakens. Finally, though excess demand explains a large proportion of the variability of the change in price, it explains only a small proportion of the variability of the speed of adjustment.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927-5398(07)00086-2
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:15:y:2008:i:3:p:533-548

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().