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Measures of Contributions to Price Discovery: A Comparison

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  • Frank de Jong

    ()
    (University of Amsterdam, CEPR)

Abstract

This note clarifies the relation between two competing definitions of the contribution to pricediscovery in market microstructure models: (i) the information share and (ii) the common factorcomponent weight. It is demonstrated that the two measures are closely related, but that only theinformation share takes into account the variability of the innovations in each market's price.

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File URL: http://papers.tinbergen.nl/01114.pdf
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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-114/2.

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Date of creation: 22 Nov 2001
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Handle: RePEc:dgr:uvatin:20010114

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Web page: http://www.tinbergen.nl

Related research

Keywords: Price discovery; Cointegration; Permanent-Transitory decomposition;

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  1. Gonzalo, Jesus & Granger, Clive W J, 1995. "Estimation of Common Long-Memory Components in Cointegrated Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 27-35, January.
  2. Hasbrouck, Joel, 1995. " One Security, Many Markets: Determining the Contributions to Price Discovery," Journal of Finance, American Finance Association, vol. 50(4), pages 1175-99, September.
  3. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
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