Price Discovery in London’s Upstairs Equity Market

39 Pages Posted: 31 Jan 2015 Last revised: 15 May 2015

See all articles by Seth Armitage

Seth Armitage

University of Edinburgh - Accounting and Finance

Gbenga Ibikunle

University of Edinburgh; European Capital Markets Cooperative Research Centre

Date Written: January 29, 2015

Abstract

The paper presents new evidence on the contribution to price discovery of the upstairs market. The ‘component share’ and ‘information share’ measures are used, supplemented by the probability of informed trading (PIN) analysis. Most discovery arises downstairs, consistent with previous findings. But the upstairs market makes a non-negligible contribution, which approaches that of the downstairs market at the start and close of the day. The PIN estimates indicate that a higher proportion of upstairs than downstairs trades are informed. The upstairs has a larger role in price discovery than previous evidence suggests.

Keywords: Market microstructure, Price discovery, Upstairs market, Downstairs market

JEL Classification: G12, G14

Suggested Citation

Armitage, Seth and Ibikunle, Gbenga, Price Discovery in London’s Upstairs Equity Market (January 29, 2015). Available at SSRN: https://ssrn.com/abstract=2557585 or http://dx.doi.org/10.2139/ssrn.2557585

Seth Armitage

University of Edinburgh - Accounting and Finance ( email )

29 Buccleuch Place
Edinburgh, EH8 9JS
United Kingdom
44 131 650 3794 (Phone)

Gbenga Ibikunle (Contact Author)

University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

European Capital Markets Cooperative Research Centre ( email )

Viale Pidaro 42
Pescara, 65121
Italy

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