A Structural Approach To Information Shares
We 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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|Date of creation:||02 Oct 2011|
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