Price Discovery in Fragmented Markets

Posted: 28 Dec 2009

See all articles by Frank De Jong

Frank De Jong

Tilburg University - Department of Finance

Peter C. Schotman

Maastricht University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: Winter 2010

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 () 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 () information shares. We apply the model to two sets of Nasdaq dealer quotes.

Keywords: C32, F31, High-frequency data, microstructure, structural time-series models

Suggested Citation

De Jong, Frank and Schotman, Peter C., Price Discovery in Fragmented Markets (Winter 2010). Journal of Financial Econometrics, Vol. 8, Issue 1, pp. 1-28, 2010, Available at SSRN: https://ssrn.com/abstract=1528358 or http://dx.doi.org/nbp015

Frank De Jong (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Peter C. Schotman

Maastricht University - Department of Finance ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 388 3862 (Phone)
+31 43 388 4875 (Fax)

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