pricediscovery
Price discovery is the process by which the prices of assets are determined through the combined actions of buyers and sellers in financial markets. It integrates all available information—fundamental data, news, expectations, and liquidity conditions—into prices, aiming to reflect the true or consensus value of an asset at any given time. Efficient price discovery occurs when prices quickly incorporate information and adjust to new data, while prices that lag reflect information asymmetries, transaction costs, or market frictions.
In practice, price discovery happens across trading venues and time. In continuous markets, the order book and
Factors affecting price discovery include liquidity, transparency, market fragmentation, and regulatory rules; technological advances and high-frequency
Measurement of price discovery quality uses metrics such as bid-ask spreads, market depth, price impact of trades,
Price discovery underpins efficient capital allocation and risk management by producing timely price signals that guide