Price Discovery in Fragmented Markets

F. de Jong, P.C. Schotman*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper proposes a structural time-series model for the intraday price dynamics on fragmented financial markets. We generalize the structural model of Hasbrouck (1993) to a multivariate setting. We discuss identification issues and propose a new measure for the contribution of each market to price discovery related to the Hasbrouck (1995) information shares. We apply the model to two sets of Nasdaq dealer quotes.

Original languageEnglish
Pages (from-to)1-28
Number of pages28
JournalJournal of Financial Econometrics
Volume8
Issue number1
DOIs
Publication statusPublished - 1 Jan 2010

Keywords

  • C32
  • F31
  • High-frequency data
  • microstructure
  • structural time-series models
  • SECURITY
  • COMPONENTS
  • VOLATILITY
  • QUALITY
  • STOCKS

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