Price discovery and common factor models

London or New York: where and when does the gold price originate?

“…Therefore when the London market is the first this gives up an upper limit and when it is second a lower limit of its information share. Following Zhang and Wei (2010) and Baillie et al (2002)the average of these upper and lower limits is given as the estimate of a markets information share.…”

Credit spreads: An empirical analysis on the informational content of stocks, bonds, and CDS

“…Whereas Hasbrouck (1995) decomposes the implicit efficient price variance and attributes a greater share of the efficient price discovery to the market that contributes most to this price variance, GG decomposes the permanent component itself and, ignoring the correlation between markets, attributes the leading role solely to the market that adjusts least to the price movements in the other markets. Baillie et al (2002) maintain that both approaches are complementary rather than substitutive, as they supply different views of the price discovery process. Ordering of variables is crucial in Hasbrouck's approach, leading to upper and lower bounds in markets' information shares.…”

“…Ordering of variables is crucial in Hasbrouck's approach, leading to upper and lower bounds in markets' information shares. As suggested by Baillie et al (2002), we use the midpoint of these bounds (HM).…”

Price Discovery and Trade Fragmentation in a Multi-Market Environment: Evidence from the MTS System

“…Shortening the interval of observation could help to reduce these correlations and obtain tighter bounds (Hasbrouck, 1995). However, a number of studies (Booth et al, 2002;Huang, 2002;Eun and Sabherwal, 2003) have found a wide divergence between upper and lower bounds even when using prices sampled at a few minute intervals (a very high frequency for the case of euro-denominated government securities). Therefore, wide bounds are inevitable for our IS measure.…”