Article ID Journal Published Year Pages File Type
5055023 Economic Modelling 2012 7 Pages PDF
Abstract

Efficient price setting implies that news create volatility since traders flock to the market in order to re-optimise their portfolios. In due course of the price finding process volatility should decline once the asset price approaches its new, efficient level. In this note I present evidence that the reverse mechanism plays as well. Traders genuinely increase volatility challenging the presumption that more traders help to identify the efficient price more quickly.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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