Price discovery in the U.S. treasury market : price contribution and trade informativeness

美國國債市場中的價格發現 : 不同市場的價格貢獻與交易信息量

Student thesis: Doctoral Thesis

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  • Jie CHEN

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Awarding Institution
Award date2 Oct 2015


In this thesis, using a comprehensive tick-by-tick data set from BrokerTec, I investigate the round-the-clock price discovery process in the U.S. Treasury market, especially focusing on the intraday distribution of price discovery and the information content of trades. In the first part of this study, I find that all the three major markets, Tokyo, London and New York, have significant contributions to price discovery in that the New York market contributes the largest proportion, followed by Tokyo and London markets. Furthermore, the regression results show that, in general, aggregate trading activity and market order imbalance are positively related with the magnitude of price discovery. However, market liquidity appears not to affect price discovery very much, except for the Tokyo market. Besides, on macroeconomic announcement days, while price discovery in Tokyo is significantly lower, more price discovery occurs during the regular trading hours in New York. The increased price discovery following macroeconomic announcements is positively related to the announcement surprises which loses its explanatory power after controlling for other trading activity variables. In the second part of the study, I find that the informativeness of trades is relatively high during the preopen and postclose periods, followed by the regular trading hours (except for the 2-year note), and lowest in the overnight market. Moreover, the regression results show that the informativeness of trades is negatively affected by trading volume and declines when the liquidity is low. Order imbalance has a positive and significant effect on the informativeness of trades during the preopen period and regular trading hours. Larger trades convey more information in the overnight market and the preopen period. During the 2007–2009 global financial crisis, the informativeness of trades is significantly lower, indicating that public information contributes more to price discovery in times of financial turmoil. In addition, compared to nonannouncement days, the informativeness of trades on announcement days decreases before and right after announcements. The decrease in the informativeness of trades following announcements is negatively and significantly related to the announcement surprise.

    Research areas

  • Government securities, United States., Prices