The Relative Contemporaneous Information Response. A New Cointegration-Based Measure of Price Discovery
AbstractThis paper describes the cointegration-based technologies commonly used to assess the relative price discovery across markets, namely the Hasbrouck information shares and Gonzalo-Granger long memory common factor weights, and presents a new metric denominated contemporaneous information response. These metrics are compared via simulation experiments. It is shown that, under fairly regular market conditions, the contemporaneous information response is a reliable measure of the relative incorporation of information, and in most cases is more resilient to microstructural noise than the other two metrics.
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Bibliographic InfoPaper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2012-04.
Length: 50 pages
Date of creation: Mar 2012
Date of revision:
Price discovery; High frequency data; Information shares; Common factors; FTSE 100; Stock index futures; Market microstructure.;
Find related papers by JEL classification:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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