This note is commenting on Hasbrouck (2018). The paper investigates the problem of price discovery on markets with trades recorded at sub-millisecond frequencies. The application of the popular information share measure of Hasbrouck (1995) to such data faces several difficulties, as the underlying vector error correction models would need a huge number of lags to capture dynamics at different time-scales. The problem is handled by imposing a set of restrictions on parameters inspired by the HAR model for realized volatility. We illustrate some potential drawbacks of the information share measure adopted in the paper and propose a modeling strategy aimed at dealing with such limitations. In particular, we introduce a structural multi-market model with a lagged adjustment mechanism describing lagged absorption of information across markets. The advantages of themethod are shown in simulations.
|Titolo:||Comment on: Price Discovery in High Resolution|
|Data di pubblicazione:||2019|
|Parole Chiave:||High-resolution; high-frequency trading; information share; HAR; lagged-adjustment|
|Digital Object Identifier (DOI):||http://dx.doi.org/10.1093/jjfinec/nbz008|
|Appare nelle tipologie:||1.1 Articolo in rivista|