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A Tale of Two Tails: A New Unique Information Share Measure Based on Copulas

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  • Yanlin Shi

Abstract

I propose a novel measure of information share, termed tail information share (TIS), which focuses on modeling the tail dependence of price innovations using copulas. I discuss its detailed technical properties, including unique identifiability, estimation procedures, and statistical properties. The proposed TIS improves over two commonly used measures by providing meaningful economic rationale and unique identifiability. My simulation studies indicate that TIS can yield more accurate estimates of market-specific contributions to price discovery when tail dependence is present. Additionally, I demonstrate the asymptotic consistency and efficiency of TIS estimators. An empirical illustration is provided using a new dataset of high-frequency crude oil futures.

Suggested Citation

  • Yanlin Shi, 2024. "A Tale of Two Tails: A New Unique Information Share Measure Based on Copulas," Journal of Financial Econometrics, Oxford University Press, vol. 22(4), pages 1170-1208.
    • Handle: RePEc:oup:jfinec:v:22:y:2024:i:4:p:1170-1208.
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    File URL: http://hdl.handle.net/10.1093/jjfinec/nbad023
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    More about this item

    Keywords

    copulas; crude oil markets; information share; price discovery; tail dependence;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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