An Empirical Research on the Intraday Price Discovery across Stocks of the Same Industry Based on the Informed Trading

In previous literatures it is often assumed that price discovery takes place within a single security. Based on informed trading, this paper takes quarterly reports disclosure as the event and uses intraday transaction data to study the interactions between return and order flow of two competitors. The research result, however, shows that on Chinese market stock often has information content for their intra-industry rivals even after controlling for the influence of quarterly reports, and so provides evidence about the existence of the cross-stock price discovery function between equities in the same industry. We are surprised to find that this phenomenon doesn爷t have a more significant performance near the disclosure. The reason may be related to the particularity of Chinese market, besides that the cross-stock trading incentives may be stronger if the information is an industry-wide one.