Price discovery in tick time
AbstractThis paper develops a tick time model for the quote setting dynamics on Nasdaq. The model decomposes quotes into an efficient price, asymmetric information and noise. Both the evolution of the efficient price and the information contents of quotes depend on quote durations. New measures for the contribution to price discovery are defined within this model. When aggregated to fixed calendar time intervals, they relate closely to Hasbrouck [Hasbrouck, Joel, 1995, One security, many markets: determining the contribution to price discovery, Journal of Finance 50, 1175-1199] information shares. Empirical results for 20 Nasdaq stocks indicate that ECNs, in particular Island, contribute most to price discovery for active stocks. For less active stocks, wholesale market makers contribute most.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Empirical Finance.
Volume (Year): 16 (2009)
Issue (Month): 5 (December)
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Web page: http://www.elsevier.com/locate/jempfin
Price discovery Tick time models Nasdaq Ultra-high frequency data Microstructure;
Other versions of this item:
- Frijns, Bart & Schotman, P., 2004. "Price discovery in tick time," Open Access publications from Maastricht University urn:nbn:nl:ui:27-6098, Maastricht University.
- Frijns, Bart & Schotman, Peter C, 2004. "Price Discovery in Tick Time," CEPR Discussion Papers 4456, C.E.P.R. Discussion Papers.
- Frijns, Bart & Schotman, Peter, 2009. "Price discovery in tick time," Open Access publications from Maastricht University urn:nbn:nl:ui:27-23096, Maastricht University.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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