Abstract
Contrary to the weak role of single stock derivatives found in the price discovery literature, this paper finds that single stock futures (SSF) traded on a liquid exchange have a high average information share of 49 percent, which increases by six percentage points upon information arrival. A partial equilibrium analysis shows that the choice of trading venue depends on the tradeoff between the benefits of leverage versus differences in liquidity of the two markets. Predictions about cross-sectional variations in the price discovery are validated by the empirical analysis, but only the liquidity difference influences this variation during information arrival.
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