A Structural Approach To Information Shares
AbstractWe undertake a structural analysis of the Hasbrouck unobserved components and the Madhavan, Richardson, and Roomans microstructure models. We map carefully the relationship between the structural parameters and four alternative measures of price discovery: (1) Hasbrouck; (2) Harris-McInish-Wood; (3) deJong-Schotman; and (4) Yan-Zivot. We describe analytically problems with using each measure: negative information shares; non-uniqueness; and potential violations of market efficiency. Simulation evidence also describes fragile inferences about the uncertainty of share estimates, misleading implications about price discovery, and the pattern of price adjustment. In an application to the Nasdaq dual listing experiment in 2004, we fi�nd that price discovery did not shift significantly towards the Nasdaq.
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Bibliographic InfoPaper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 201130.
Length: 20 pages
Date of creation: 02 Oct 2011
Date of revision:
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microstructure; information shares; structural model; MCMC estimation; dual listing;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- D4 - Microeconomics - - Market Structure and Pricing
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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- Guglielmo Maria Caporale & Alessandro Girardi, 2011.
"Price Discovery and Trade Fragmentation in a Multi-Market Environment: Evidence from the MTS System,"
CESifo Working Paper Series
3525, CESifo Group Munich.
- Caporale, Guglielmo Maria & Girardi, Alessandro, 2013. "Price discovery and trade fragmentation in a multi-market environment: Evidence from the MTS system," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 227-240.
- Guglielmo Maria Caporale & Alessandro Girardi, 2011. "Price Discovery and Trade Fragmentation in a Multi-Market Environment: Evidence from the MTS System," Discussion Papers of DIW Berlin 1139, DIW Berlin, German Institute for Economic Research.
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