Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • October 2007
  • Background Note
  • HBS Case Collection

Price Formation

By: Joshua D. Coval and Erik Stafford
  • Format:Print
  • | Pages:7
ShareBar

Abstract

Investigates how prices are formed in competitive capital markets. Focuses on a single security called AOE. Students compete with computer traders and each other for market making and informed trading profits. Participants receive a variety of public news in the form of a research report on AOE, as well as subscriptions to news announcements and public quarterly earnings forecasts and releases. Participants also have access to costly private information in the form of one-week-ahead price targets for a per-use fee. The market structure is one with a centralized limit order book, but the ability to place limit orders is limited. The simulation of AOE is based on an actual security that has been disguised in time and industry to prevent students from anticipating the price path. All public news and contextual market information presented to students during the simulation correspond to actual information available to market participants in the real world at the time.

Keywords

Capital Markets; Price; Profit; Corporate Disclosure; Newsletters; Industry Structures; Business Processes; Competitive Strategy

Citation

Coval, Joshua D., and Erik Stafford. "Price Formation." Harvard Business School Background Note 208-040, October 2007.
  • Educators

About The Authors

Joshua D. Coval

Finance
→More Publications

Erik Stafford

Finance
→More Publications

More from the Authors

    • June 2022
    • Faculty Research

    Ocean Carriers (Abridged) Courseware

    By: Erik Stafford
    • March 2022
    • Faculty Research

    Exchanging Salary for Stock Options at a Startup

    By: Erik Stafford
    • January 2022
    • Review of Financial Studies

    Replicating Private Equity with Value Investing, Homemade Leverage, and Hold-to-Maturity Accounting

    By: Erik Stafford
More from the Authors
  • Ocean Carriers (Abridged) Courseware By: Erik Stafford
  • Exchanging Salary for Stock Options at a Startup By: Erik Stafford
  • Replicating Private Equity with Value Investing, Homemade Leverage, and Hold-to-Maturity Accounting By: Erik Stafford
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College