Stalking the "Efficient Price" in Market Microstructure Specifications: An Overview

24 Pages Posted: 13 Nov 2008

See all articles by Joel Hasbrouck

Joel Hasbrouck

New York University (NYU) - Department of Finance

Date Written: June 2000

Abstract

The principle that revisions to the expectation of a security's value should be unforecastable identifies this expectation as a martingale. When price changes can plausibly be assumed covariance stationary, this in turn motivates interest in the random walk. In the presence of the market frictions featured in many microstructure models, however, this expectation does not invariably coincide with observed security prices such as trades and quotes. Accordingly, the random walk becomes an implicit, unobserved component. This paper is an overview of econometric approaches to characterizing this important component in single- and multiple-price applications.

Suggested Citation

Hasbrouck, Joel, Stalking the "Efficient Price" in Market Microstructure Specifications: An Overview (June 2000). NYU Working Paper No. FIN-00-047. Available at SSRN: https://ssrn.com/abstract=1300733

Joel Hasbrouck (Contact Author)

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
MEC Suite 9-190, Mail Code 0268
New York, NY 10012-1126
United States
212-998-0310 (Phone)
212-995-4233 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
286
rank
104,289
Abstract Views
1,436
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information