Author's profile

Thierry Foucault
HEC Paris


Author articles

  • An essential function of securities markets is to discover asset values. The function is critical for an efficient allocation of capital in the economy, as better price discovery in the stock market translates into better capital allocation decisions. For this reason, regulators and academics often see the maximisation of price discovery as an extremely important goal. Market design depends in large part on the decisions of stock exchanges and stock exchanges themselves are now for-profit firms. Their income derives from trading revenues and increasingly from the sale of information on prices. In this paper, we show that the efficiency of price discovery is, among other factors, determined by the fee charged by exchanges for price information.

    06/03/2013 | 10,167
  • Dealers use prices of other securities as a source of information. As prices of less liquid securities convey less precise information, a drop in liquidity for one security raises the uncertainty for dealers in other securities, thereby affecting their liquidity.

    This working paper looks at causes for the occurrence of liquidity (or illiquidity) spillovers across markets and proposes a novel theoretical explanation that provides interesting insights into recent events, for example the 'Flash Crash' of May 2010.

    14/01/2013 | 5,593