International Price Discovery in Stock Markets - A Unique Intensity Based Information Share

Abstract:     
This paper proposes a new information share for price discovery based on Russell's (1999) autoregressive conditional intensity model. While previous studies rely on equally spaced high frequency data, we use the information conveyed by trade intensities to determine a market's contribution to price discovery. Thereby, we account for the irregular nature of transaction data. Moreover, in contrast to the commonly applied Hasbrouck (1995) approach, which yields lower and upper bounds for information shares, our model delivers a unique measure. Our empirical application to US-listed Canadian stocks supports previous evidence for the home market leadership in price discovery.

Keywords: Price Discovery, Multivariate Autoregressive Conditional Intensity, Cross-Listed Stocks

JEL Classifications: C1, C3, C5, G1

Working Paper Series