Download or read book Price Discovery in the Stock and Corporate Bond Markets written by Yifei Mao and published by . This book was released on 2014 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses intraday U.S. bond transaction and stock quote data to investigate whether corporate bonds lead stocks in price discovery of underlying firm value. I use Hasbrouck's (1995) "information share" approach to determine the relative contribution of corporate bonds to price discovery. Based on a sample of 214 firms, I find that corporate bond markets contribute 12.6% on average to price discovery from 2009 to 2011. Corporate bond market price discovery increases with the riskiness of the underlying firm value, and is related to contemporaneous market conditions. The findings are consistent with the informed trading theory and Merton (1973) model.