Comment on: Price Discovery in High Resolution

Giuseppe Buccheri, Giacomo Bormetti, Fulvio Corsi and Fabrizio Lillo

Journal of Financial Econometrics, 2021, vol. 19, issue 3, 439-451

Abstract: This note is commenting on Hasbrouck (2018). The paper investigates the problem of price discovery on markets with trades recorded at sub-millisecond frequencies. The application of the popular information share measure of Hasbrouck (1995) to such data faces several difficulties, as the underlying vector error correction models would need a huge number of lags to capture dynamics at different time-scales. The problem is handled by imposing a set of restrictions on parameters inspired by the Heterogeneous Autoregressive model for realized volatility. We illustrate some potential drawbacks of the information share measure adopted in the paper and propose a modeling strategy aimed at dealing with such limitations. In particular, we introduce a structural multi-market model with a lagged adjustment mechanism describing lagged absorption of information across markets. The advantages of the method are shown in simulations.

Keywords: high-resolution; high-frequency trading; information share; HAR; lagged-adjustment (search for similar items in EconPapers)
JEL-codes: C32 C58 G14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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