
This paper develops a tick time model for the quote setting dynamics on nasdaq. The model decomposes quotes into an efficient price, asymmetric information and noise. Both the evolution of the efficient price and the information contents of quotes depend on quote durations. New measures for the contribution to price discovery are defined within this model. When aggregated to fixed calendar time intervals, they relate closely to hasbrouck [hasbrouck, joel, 1995, one security, many markets: determining the contribution to price discovery, journal of finance 50, 1175–1199] information shares. Empirical results for 20 nasdaq stocks indicate that ecns, in particular island, contribute most to price discovery for active stocks. For less active stocks, wholesale market makers contribute most.
microstructure; nasdaq; price discovery; tick time models; ultra-high frequency data, jel: jel:G15, jel: jel:C32
microstructure; nasdaq; price discovery; tick time models; ultra-high frequency data, jel: jel:G15, jel: jel:C32
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