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Telltale Tails: A New Approach to Estimating Unique Market Information Shares

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  • Grammig, Joachim
  • Peter, Franziska J.

Abstract

The trading of securities on multiple markets raises the question of each market’s share in the discovery of the informationally efficient price. We exploit salient distributional features of multivariate financial price processes to uniquely determine these contributions, thereby resolving the main drawback of the widely used Hasbrouck (1995) methodology, which merely provides upper and lower bounds of a market’s information share. We show how tail dependence of price changes, which may emerge as a result of differences in market design, can be exploited to estimate unique information shares. Two empiricalapplications illustrate the practical use of the new methodology.

Suggested Citation

  • Grammig, Joachim & Peter, Franziska J., 2013. "Telltale Tails: A New Approach to Estimating Unique Market Information Shares," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(2), pages 459-488, April.
    • Handle: RePEc:cup:jfinqa:v:48:y:2013:i:02:p:459-488_00
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