Measuring Common and Market-Specific Information Flows

27 Pages Posted: 4 Feb 2022 Last revised: 15 Feb 2024

See all articles by Jian-Xin Wang

Jian-Xin Wang

University of Technology Sydney; Financial Research Network (FIRN)

Minxian Yang

UNSW Australia Business School, School of Economics

Qi Zhang

University of Technology Sydney

Date Written: February 14, 2024

Abstract

When an asset is traded in multiple markets, the model of Hasbrouck (1995, 2021) assumes that information is priced sequentially across markets, thereby underestimates price innovations and information flows in slower markets. This study introduces a common information component across markets and mitigates the speed-induced bias. At intervals from 0.01 to 2 seconds, the common information shares are 66 - 94% between the listing and other exchanges, and 60 - 90% between quotes and trades. Allowing common information alters the ranking of market-specific information shares. As trading speed increases, the common information shares have increased over time.

Keywords: Price discovery, common information, market-specific information, high frequency trading, information share

JEL Classification: G10, G14, C32

Suggested Citation

Wang, Jian-Xin and Yang, Minxian and Zhang, Qi, Measuring Common and Market-Specific Information Flows (February 14, 2024). UNSW Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3980198 or http://dx.doi.org/10.2139/ssrn.3980198

Jian-Xin Wang (Contact Author)

University of Technology Sydney ( email )

UTS Business School
Finance Decipline
Sydney, NSW
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Minxian Yang

UNSW Australia Business School, School of Economics ( email )

School of Economics
The University of New South Wales
Sydney, NSW NSW 2052
Australia
93853353 (Phone)

Qi Zhang

University of Technology Sydney ( email )

Australia

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