Price discovery and common factor models

摘要: Abstract If a financial asset is traded in more than one market, common factor models may be used to measure the contribution of these markets price discovery process. We examine relationship between Hasbrouck (J. Finance (50) (1995) 1175) and Gonzalo Granger Bus. Econ. Stat. 13 27) models. These two complement each other provide different views process markets. The model focuses on components error correction process, while considers market's variance innovations factor. show that are directly related similar results if residuals uncorrelated However, substantive correlation exists, they typically results. illustrate differences using analytic examples plus real world example consisting electronic communications networks (ECNs) Nasdaq market makers.