A Structural Approach To Information Shares

Oleg Korenok, Bruce Mizrach and Stanislav Radchenko ()
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Stanislav Radchenko: Goldman Sachs

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: We undertake a structural analysis of the Hasbrouck unobserved components and the Madhavan, Richardson, and Roomans microstructure models. We map carefully the relationship between the structural parameters and four alternative measures of price discovery: (1) Hasbrouck; (2) Harris-McInish-Wood; (3) deJong-Schotman; and (4) Yan-Zivot. We describe analytically problems with using each measure: negative information shares; non-uniqueness; and potential violations of market efficiency. Simulation evidence also describes fragile inferences about the uncertainty of share estimates, misleading implications about price discovery, and the pattern of price adjustment. In an application to the Nasdaq dual listing experiment in 2004, we fi nd that price discovery did not shift significantly towards the Nasdaq.

Keywords: microstructure; information shares; structural model; MCMC estimation; dual listing (search for similar items in EconPapers)
JEL-codes: C32 D4 G14 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2011-10-02
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:201130

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