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The Relative Contemporaneous Information Response: A New Cointegration-Based Measure of Price Discovery

Helder Sebastião

No 2012-04, GEMF Working Papers from GEMF, Faculty of Economics, University of Coimbra

Abstract: This paper describes the cointegration-based technologies commonly used to assess the relative price discovery across markets, namely the Hasbrouck information shares and Gonzalo-Granger long memory common factor weights, and presents a new metric denominated contemporaneous information response. These metrics are compared via simulation experiments. It is shown that, under fairly regular market conditions, the contemporaneous information response is a reliable measure of the relative incorporation of information, and in most cases is more resilient to microstructural noise than the other two metrics.

Keywords: Price discovery; High frequency data; Information shares; Common factors; FTSE 100; Stock index futures; Market microstructure. (search for similar items in EconPapers)
JEL-codes: G13 G14 G15 G21 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2012-03
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (2)

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