Price Discovery in Fragmented Markets
Posted: 28 Dec 2009
Date Written: Winter 2010
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
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