DP3987 Price Discovery in Fragmented Markets
|Author(s):||Frank de Jong, Peter C Schotman|
|Publication Date:||July 2003|
|Keyword(s):||high-frequency data, microstructure, structural time series models|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=3987|
This Paper proposes a structural time series model for the intra-day price dynamics of fragmented financial markets. We generalize the structural model of Hasbrouck (1993) to a multivariate setting. We discuss identification issues and propose a new measure for the contribution of each market to price discovery. We illustrate the model by an empirical example using Nasdaq dealer quotes.