Price discovery and long-distance market integration: Evidence from the Republican Chinese Cotton Goods Exchange

The impact of RMB’s SDR inclusion on price discovery in onshore-offshore markets

This paper employs newly developed techniques of nonlinear cointegration analysis to study international real estate market integration and price discovery. The countries considered in this study are UK, USA, Netherlands and France. Direct (NCREIF, IPD) and indirect (EPRA) real estate price indexes are used in both linear and nonlinear cointegration tests on bivariate and a variety of multivariate models. The objective is two-fold: a) to examine whether there is price discovery between the direct and indirect real estate market b) to determine the degree of integration between international real estate markets. The models will be evaluated within a portfolio investment framework. Much more evidence of market integration emerges from nonlinear cointegration analysis than linear analysis. It appears, therefore, that many of the conclusions reached in prior work that have used traditional methodologies need to be reconsidered. The degree of market integration has significant implications for portfolio investment where managers seek to develop well diversified portfolios.

The research title is price discovery and efficiency of Malaysian property market and it is pursue due to the importance of property asset in the Malaysian economy. The objectives of research are to look into issues related to efficiency in the Malaysia property market between direct and indirect property investment. Issues such as market segmentation and integration will be highlighted as well as how these two markets interacted. Additionally lack of local research on this matter makes issues on market efficiency is still a question and gives an opportunity to explore further on this topic. The research will heavily rely on various econometric methods as a research procedure and due to non-existence of commercial property index, an index of commercial property market will be develop based on transaction data in various state under study. This index then will be used as a test variable against others selected micro and macro economic variables. Numbers of research has been carried out in regards to market efficiency and on the linkages between direct and indirect property market such as Wang (2000), Okunev, Wilson and Zurbruegg (2000), Toluca, Myer and Webb (2000), Chau, Macgregor and Schwann (2001), Yuming Fu and Lilian (2001), Barkham and Geltner (1995) and Newell and Chau (1996). However, their findings produced mixed result for instance Greame and Chau (1996) in their research on the linkages between direct and indirect property performance in Hong Kong find strong evidence that changes in property companies price lead changes in office and residential by one quarter. Barkham and Geltner (1995) also conclude that they found evidence of the existence of price discovery that occurred in the indirect property market. They found that in American market, price information does not fully transmit into indirect property market by a year or more whereas in U.K market direct property market is more closely and immediately linked to the indirect property market. Research on price discovery using Hong Kong real estate market data provides slightly different result. According to Chau, Macgregor and Schwann (2001) the results show that the returns to indirect real estate in Hong Kong convey little or no information about the appraisal-based return to Hong Kong real estate. They suggest that the sets of factors affecting return in the direct and indirect markets overlap but are not identical. Applying different method of measurement would also give different result. As pointed by Okunev, Wilson and Zurbruegg (2000), their research found that by using linear causality tests produce spurious result which shows causality runs from real estate to stock market, despite no evidence on any long-run linear relationship and suggest this could be due to structural breaks within time series and a nonlinear co integrative relationship between the markets. When conducting a nonlinear causality test, strong unidirectional relationship running from stock market to the real estate market is found and it is consistent with the presence of any structural breaks. They also suggest, given the nonlinear relationship between the markets, simple extrapolation will not serve much purpose and knowing that a three to six month lag period exists will only be of use if the full functional relationship between the two markets can be modeled. In the study to analyze long-term relationship among five indices, Tuluca, Myer and Webb (2000) found that price is discovered between direct and indirect real estate markets through feedback process, with the private market possibly leading the process. They suggest that due to particularity of real estate market, price discovery is a more complex process than initially believed and the definition of market efficiency is different. The differences in previous findings indicate that in depth research is required to be conducted within its local property market so that nature of relationship between direct and indirect can be understand further. Other than that, lack of research in this area in Malaysia also pose significant problem. Problem such as determination of allocation investment portfolio requires in-depth understanding of any investment market for fund manager. On the other hand, additional understanding in property market in relation with other investment market also important for policy making decision.

Effects of Decimalization and Regulation FD on Market Integration

Global price discovery in the Australian dollar market and its determinants

The current study aimed to examine the causal relationship between the NSE currency future rates and currency spot rates in order to identify the price discovery mechanism at NSE market and its integration with foreign exchange market (spot market). To study the causal relationship between the said markets, we have considered daily closing rates for NSE currency futures and currency spot rates for selected pairs of currencies, i.e. USD/INR, GBP/INR, JPY/INR and EURO/INR. The data was obtained from www.nseindia.com and www.investing.com for the period from Jan-2010 to Sep-2017, which makes approximately 1750 observations for each currency pair in each market. It is found that the spot rate for JPY/INR leads the future rate. It is also identified that the spot rate for USD/INR does not cause the changes in futures. It indicates that the market integration between spot and futures at NSE for currency pair USD/INR is strong compared to other selected currency pairs. From the variance decomposition test we found that there is almost no impact of variance in USD/INR spot rate on future rate variance forecast errors. It implies that the causal relationship between for USD/INR spot and future rates is strong and mature compared to the measured causal relationships for the remaining currency pairs. This study concludes that the price discovery process for currency pair USD/INR is better at NSE currency futures among the selected currency pairs.

Academics and practitioners discuss the state of capital market integration in Europe and specifically, several metrics of market efficiency and market integrity pre and post-MiFID. Security market integrity is measurable, and higher integrity lowers spreads and price impact, improving market efficiency. European spreads were amongst the lowest in the world well before MiFID. After MiFID, market manipulation dislocating the close fell in London but rose in Paris. Cumulative abnormal profit from trading ahead of price sensitive announcements as a percentage of turnover remains half as great in Paris as in London. Trading on Chi-X ahead of price-sensitive announcements is lower than average for Europe which on this metric has the highest integrity on a regional basis worldwide. Xetra exhibits the highest overall market integrity amongst all European exchanges and MTFs, pre and post-MiFID. Price discovery efficiency in London and Paris has declined with the fragmentation of order flow post-MiFID. Keywords: Market quality, market integrity, manipulation, insider trading, price discovery

An Analysis of Euro Area Sovereign CDS and Their Relation with Government Bonds

The present study assesses the market integration of chickpea in India from 2003 to 2010. The month end prices of chickpea for twelve markets in north India were used for the study. Out of twelve markets, only three markets are cointegrated, indicating weak integration of chickpea markets in India. However, the terminal markets located in major consuming (Delhi) and export/import locations (Dohad/Gujarat) clearly play an important role in price discovery and influences other domestic markets indicating the relevance of the import prices and large consuming centres on local market prices. Error correction terms indicate that the adjustment process from short-term disequilibrium in prices to long run price equilibrium is very slow. Overall, there is evidence of weak cointegration in the chickpea markets in North India and imports and major consuming centres are playing an important role in price discovery in domestic chickpea markets.DOI: http://dx.doi.org/10.3329/sja.v10i2.18320 SAARC J. Agri., 10(2): 11-29 (2012)

The New Economic Partnership for Africa's Development (NEPAD) focuses on the benefits of integrating many smaller African markets with South Africa as the central hub, motivated by a wish to attract foreign investment and increase the liquidity. However, little attention has been paid to issues regarding the migration of liquidity and the loss of the price discovery mechanism in an integrated union where one market dominates. This article reviews this policy using the example of Namibia, which is the first market to be fully integrated with South Africa. Several established liquidity constructs are compared to determine their ability to explain the bid–ask spread plus a newly introduced measure of the proportion of daily zero returns, which captures the dynamics of the price discovery process and traders’ ability to trade on informational grounds that is found to be more appropriate in highly illiquid frontier markets, such as Namibia. Finally, there is evidence that liquidity (and illiquidity) is closely linked to the rule of law and institutional quality measures of the control of corruption, while the price-discovery process (and hence trader participation in markets) is highly sensitive to the control of corruption, political stability and regulatory quality.

A review of the literature on LNG: Hubs development, market integration, and price discovery

This paper examines trading patterns and market integration using laboratory asset markets. Our markets are designed to approximately correspond to the trading day for stocks cross-listed in markets in Europe and North America. Some of our markets feature timing restrictions so that participants cannot trade across markets except during a fully integrated overlap period. Comparison of markets with and without timing restrictions shows that restrictions reduce trading activity and shift transactions to the overlap period. When asset values are extreme, price discovery can be impeded when trading restrictions exist. The measurement of liquidity suggests that trading restrictions increase overall spreads.

A Review of the Literature on LNG Hubs Development, Market Integration, and Price Discovery

本又以日內資料分析台灣期貨市場的價格發現功能與資訊傳遞過程，Johansen的共整合模型顯示，台股現貨與期貨的價格間存在一共同長期趨勢，兩市場形成共整合系統，就整段研究期間而言，現貨價格修正本身偏離而朝向長期均衡的態勢較明擷，表示期貨價格的主導地位較強。但是兩市場都具有雙向回饋的資訊傳遞，相互參考彼此落後期的價格而調整當期的價格變化。變異數分解和衝擊反應函數也證實兩市場的雙向影響效果，然而預測誤差變異數中包含較多來自期貨的變異，同時期貨的衝擊也對整個系統的影響較現貨衝擊深遠，證明較多及較強的資訊由期貨市場流向現貨市場，造就期貨比較明顯的價格發現功能，整體而言，台股期貨與現貨市場具有穩定的長期均衡關係，短期間的資訊交流和價格互動也十分頻繁，價格發現的差異並不影響市場整合的態勢。將研究期間分割為三期後，本文更觀察到期貨市場的主導地位在成交量放大的後兩期明顯提昇，顯示交易量與價格發現的功能存在正向關係，以及期貨市場因逐漸成熟而展現更佳的價格發現能力。

The status of integration among various domestic markets of select agricultural commodities in India has been documented. The degree of integration and the speed of price transmission were found to be different across various commodities. Cereals like rice and wheat showed better integration compared to other perishable commodities. The wholesale and retail markets of rice and wheat were integrated in the long run as well as in the short run. Grams also showed better market integration which may be due to the absence of trade restriction on the domestic trade of grams in India. The domestic apple markets in India were poorly integrated due to weak market infrastructure and institutions as well as lack of competition between domestic suppliers. Markets of other fruits like banana and pineapple also showed poor integration. Among the vegetables, domestic potato markets were poorly integrated in contrast to the better integration among the onion markets. The information flow and the price transmission was found to be effective among the futures and spot markets of some of the agricultural commodities. The spot and futures were integrated in the case of chickpea, wheat and maize, and that of barley was not integrated. Wheat and maize markets showed better efficiency in price discovery.