Department of Economics and Business Economics

The price discovery literature investigates how homogenous securities traded on different markets incorporate information into prices. We take this literature one step further and investigate how these markets contribute to stochastic volatility (volatility discovery). We formally show that the realized measures from homogenous securities share a fractional stochastic trend, which is a combination of the price and volatility discovery measures. Furthermore, we show that volatility discovery is associated with the way that market participants process information arrival (market sensitivity). Finally, we compute volatility discovery for 30 actively traded stocks in the U.S. and report that Nyse and Arca dominate Nasdaq.