A new leadership share measure for price discovery

Donald Lien, Brian Roseman and Yanlin Shi

Journal of Banking & Finance, 2025, vol. 180, issue C

Abstract: We propose a new measure of price discovery, New Leadership Share (NLS), that attributes permanent information flow to individual markets using a uniquely identified structural moving average model. NLS quantifies each market’s contribution to permanent price innovations as a proportion of total informational leadership and offers key technical advantages, including uniqueness and adherence to standard statistical asymptotics. We derive closed-form solutions and analytical standard errors for bivariate markets and provide a framework that extends naturally to multiple markets without the variable ordering problem. Simulation results show that NLS consistently outperforms three widely used benchmarks. Empirical analysis of 2023 data finds that exchange-traded funds and front-month futures markets share equal leadership relative to the S&P 500 spot index.

Keywords: Price discovery; Information share; Arbitrage; Structural models; Leadership share (search for similar items in EconPapers)
JEL-codes: C22 C51 G11 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:180:y:2025:i:c:s0378426625001475

DOI: 10.1016/j.jbankfin.2025.107527

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