Measuring price discovery: The variance ratio, the R2, and the weighted price contribution

VAN BOMMEL, Jos

doi:10.1016/j.frl.2011.05.003

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Measuring price discovery: The variance ratio, the R2, and the weighted price contribution

VAN BOMMEL, Jos

2011 • In Finance Research Letters, 8 (3), p. 112 - 119

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https://hdl.handle.net/10993/58977

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10.1016/j.frl.2011.05.003

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Keywords :

Market microstructure; Price discovery; Weighted price contribution; Finance

Abstract :

[en] We analyze the statistical properties of three price discovery measures: The variance ratio, the weighted price contribution (WPC), and the R2 of unbiasedness regressions. We find that, if the price process is a driftless martingale, only the WPC is an unbiased estimator for the return variance explained during a time interval. For autocorrelated processes with a drift, only the R2 of the unbiasedness regression is consistent, but it is biased for small samples. © 2011 Elsevier Inc.

Disciplines :

Finance

Author, co-author :

VAN BOMMEL, Jos ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Economics and Management (DEM)

External co-authors :

Language :

English

Title :

Measuring price discovery: The variance ratio, the R2, and the weighted price contribution

Publication date :

September 2011

Journal title :

Finance Research Letters

ISSN :

1544-6123

eISSN :

1544-6131

Publisher :

Elsevier BV

Volume :

Issue :

Pages :

112 - 119

Peer reviewed :

Peer Reviewed verified by ORBi

Additional URL :

https://api.elsevier.com/content/article/PII:S1544612311000286?httpAccept=text/xml

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since 19 December 2023

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