Working Paper: CEPR ID: DP3987
Authors: Frank de Jong; Peter Schotman
Abstract: 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.
Keywords: High-frequency data; Microstructure; Structural time series models
JEL Codes: C32; F31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| efficient price (D41) | observed market prices (D41) |
| structural model (E10) | identification of contributions to price discovery (G19) |
| assumptions regarding noise terms (C29) | full identification of model parameters (C51) |