The makings of an information leader: the intraday price discovery process for individual stocks in the DJIA |
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| Authors: | Marc W. Simpson Jose F. Moreno Teofilo Ozuna |
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| Affiliation: | (1) Department of Finance, Northern Illinois University, DeKalb, IL 60115, USA;(2) H-E-B School of Business and Administration, University of the Incarnate Word, 4301 Broadway, San Antonio, TX 78209, USA;(3) Department of Economics and Finance, University of Texas–Pan American, Edinburg, TX 78541, USA |
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| Abstract: | The main purpose of this paper is to construct an intraday arbitrage price series for each stock in the DJIA using information in the Diamond Trust Fund ETF. We then compute the information shares (Hasbrouck in J Finan 50(4):1175–1199, 1995) for the actual versus the arbitrage prices for each stock. While previous literature documents that ETFs lead stock indices in information origination, we find that some firms are “information leaders” in that the information share that comes from the stock price is larger than that which comes from the ETF-related arbitrage price. Further analysis is conducted to uncover the firm-specific factors that are related to a stock’s role in information generation. |
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