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A Simple Model of Information Decomposition

If a quote contains information as formulated in theory, then it is possible to elicit the information from each quote. We offer a simple method to extract the private and
the public information elements from the quote revision. The extraction is only required to know the trade direction of the previous trade. We then present empirical evidence that our estimates are informational pertinent by showing that they are highly correlated with transaction returns. Furthermore, contrasting to the pattern of the bid-ask spread, we show that the intraday private information elements are converging as trading progresses. This phenomenon is consistent to the prediction in the theory. Our public information elements also have a similar declining pattern as that of the private information element only with a different reason.

Identiferoai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0516107-171238
Date16 May 2007
CreatorsLiao, Jhih-Cian
ContributorsAnlin Chen, Chi-Jeng Wang, Meihui Guo
PublisherNSYSU
Source SetsNSYSU Electronic Thesis and Dissertation Archive
LanguageCholon
Detected LanguageEnglish
Typetext
Formatapplication/pdf
Sourcehttp://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0516107-171238
Rightsnot_available, Copyright information available at source archive

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