A factor analytical approach to price discovery

Joakim Westerlund, Simon Reese, Paresh Narayan

Research output: Contribution to journalArticleResearchpeer-review

5 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)366-394
Number of pages29
JournalOxford Bulletin of Economics and Statistics
Volume79
Issue number3
DOIs
Publication statusPublished - Jun 2017
Externally publishedYes

Keywords

  • common factor models
  • cross-unit cointegration
  • panel data
  • Price discovery

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