Premium
A new information share measure
Author(s) -
Lien Donald,
Shrestha Keshab
Publication year - 2009
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.20356
Subject(s) - measure (data warehouse) , futures contract , econometrics , database transaction , computer science , mathematics , economics , data mining , financial economics , programming language
Abstract In this study, we modify the information share (IS) originally proposed by Hasbrouck, J. (1995). The proposed modified information share (MIS) leads to a unique measure of price discovery instead of the upper and lower IS bounds. Performance of MIS is compared with the Hasbrouck IS measure and the Gonzalo–Granger permanent–transitory decomposition (PT/GG)‐based measure using simulations with 1,000 replications applied to the same three examples considered by Hasbrouck, J. (2002). The MIS is found to outperform both Hasbrouck IS measure and PT/GG measure. The empirical application of the MIS to three major stock indices indicates that price discovery takes place mostly in the futures market. Hence, the evidence supports the transaction cost hypothesis as well as the model proposed by Garbade, K. D., and Silber, W. L. (1983). © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:377–395, 2009