A Factor Analytical Approach to Price Discovery

Joakim Westerlund, Simon Reese () and Paresh Narayan ()
Additional contact information
Simon Reese: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden, http://www.nek.lu.se/en/contact/nek-sor

No 2015:4, Working Papers from Lund University, Department of Economics

Abstract: Existing econometric approaches for studying price discovery presume that the number of markets are small, and their properties become suspect when this restriction is not met. They also require making identifying restrictions and are in many cases not suitable for statistical inference. The current paper takes these shortcomings as a starting point to develop a factor analytical approach that makes use of the cross-sectional variation of the data, yet is very user-friendly in that it does not involve any identifying restrictions or obstacles to inference.

Keywords: Price discovery; panel data; common factor models; cross-unit cointegration (search for similar items in EconPapers)
JEL-codes: C12 C13 C33 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2014-12-30
New Economics Papers: this item is included in nep-ecm and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Westerlund, Joakim, Simon Reese and Paresh Narayan, 'A Factor Analytical Approach to Price Discovery' in Oxford Bulletin of Economics and Statistics, 2017, pages 366-394.

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