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- Publisher
- Oxford University Press
- Copyright
- Oxford University Press
- ISSN
- 0893-9454
- eISSN
- 1465-7368
- DOI
- 10.1093/rfs/10.4.1035
- Publisher site
- See Article on Publisher Site
Abstract
This article develops and tests a structural model of intraday price formation that embodies public information shocks and microstructure effects. We use the model to analyze intraday patterns in bid-ask spreads, price volatility, transaction costs, and return and quote auto-correlations, and to construct metrics for price discovery and effective trading costs. Information asymmetry and uncertainty over fundamentals decrease over the day, although transaction costs increase. The results help explain the U-shaped pattern in intraday bid-ask spreads and volatility, and are also consistent with the intra-day decline in the variance of ask price changes.
Journal
The Review of Financial Studies – Oxford University Press
Published: Oct 4, 1997