Component shares in continuous time

Gustavo Fruet Dias (), Marcelo Fernandes and Cristina M. Scherrer ()
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Gustavo Fruet Dias: Aarhus University and CREATES, Postal: Department of Economics and Business Economics, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Cristina M. Scherrer: Aarhus University and CREATES, Postal: Department of Economics and Business Economics, Fuglesangs Allé 4, 8210 Aarhus V, Denmark

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We formulate a continuous-time price discovery model and investigate how the standard price discovery measures vary with respect to the sampling frequency. We find that the component share measure is invariant to the sampling frequency, and hence a continuous-time price discovery measure can be identified from discrete sampled prices. We also contribute by proposing a novel estimation strategy for the continuous-time component share. We establish consistency and asymptotic normality of a kernel-based estimator that compares favourably to the standard daily VECM regression. Finally, we compute daily estimates of price discovery for 30 stocks in the U.S. from 2007 to 2013.

Keywords: high-frequency data; price discovery; continuous-time model; sampling frequency; time-varying coefficients (search for similar items in EconPapers)
JEL-codes: C13 C32 C51 G14 (search for similar items in EconPapers)
Pages: 44
Date: 2016-09-01
New Economics Papers: this item is included in nep-sog
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