Price Discovery in Fragmented Markets

28 Pages Posted: 10 Sep 2003

See all articles by Frank De Jong

Frank De Jong

Tilburg University - Department of Finance

Peter C. Schotman

Maastricht University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: July 2003

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 Classification: C32, F31

Suggested Citation

De Jong, Frank and Schotman, Peter C., Price Discovery in Fragmented Markets (July 2003). Available at SSRN: https://ssrn.com/abstract=443063

Frank De Jong (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Peter C. Schotman

Maastricht University - Department of Finance ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 388 3862 (Phone)
+31 43 388 4875 (Fax)

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