A modification to the WPC model

We modify the Barclay and Warner (1993) Weighted Price Contribution model – which measures market participants’ contribution to price discovery process – to incorporate price movements that extend beyond the final price. We validate our model with an empirical illustration. •We re-examine the Weight...

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Bibliographic Details
Published in:Economics letters 2018-10, Vol.171, p.76-78
Main Authors: Jahanshahloo, Hossein, Spokeviciute, Laima
Format: Article
Language:English
Subjects:
Discovery
Economic models
High frequency trading
Price discovery
Securities markets
Studies
Weighted price contribution
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Summary:We modify the Barclay and Warner (1993) Weighted Price Contribution model – which measures market participants’ contribution to price discovery process – to incorporate price movements that extend beyond the final price. We validate our model with an empirical illustration. •We re-examine the Weighted Price Contribution model by Barclay and Warner (1993).•We show a limitation to the WPC when price movements extend beyond the final price.•We modify the WPC by incorporating in the model the position of the final price.•We provide an empirical illustration for the validity of our Modified WPC (MWPC).
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2018.07.019