RT Journal Article
SR Electronic
T1 Price Discovery: The Economic Function
of a Stock Exchange
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 124
OP 132
DO 10.3905/jpm.2013.40.1.124
VO 40
IS 1
A1 Nazli Sila Alan
A1 Robert A. Schwartz
YR 2013
UL https://pm-research.com/content/40/1/124.abstract
AB This article defines an exchange according to its primary function: establishing shares’ trading prices. After establishing the public goods property of an exchange-produced price, the article stresses that price discovery is a complex process that depends on market structure. Recognizing that the quality of price discovery can be inferred from the magnitude of intraday price volatility, the authors display intraday volatility for a sample of DOW stocks, show how volatility decreased for NASDAQ stocks following the institution of NASDAQ’s calls in 2004, and trace the broader evolution of intraday volatility from 1993 to 2011.TOPICS: Exchanges/markets/clearinghouses, volatility measures, equity portfolio management