Department of Economics and Business Economics

Component shares in continuous time

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  • rp16_25

    Final published version, 1.9 MB, PDF document

We formulate a continuous-time price discovery model in which the price discovery measure varies (stochastically) at daily frequency. We estimate daily measures of price discovery using a kernel-based OLS estimator instead of running separate daily VECM regressions as standard in the literature. We show that our estimator is not only consistent, but also outperforms the standard daily VECM in finite samples. We illustrate our theoretical findings by studying the price discovery process of 10 actively traded stocks in the U.S. from 2007 to 2013.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages44
Publication statusPublished - 5 Sep 2016
SeriesCREATES Research Papers
Number2016-25

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