Detecting Unobserved Heterogeneity in Efficient Prices via Classifier-Lasso
通过 Classifier-Lasso 检测有效价格中的未观测异质性
This article proposes a new measure of efficient price as a weighted average of bid and ask prices, where the weights are constructed from the bid-ask long-run relationships in a panel error-correction model (ECM). To allow for heterogeneity in the long-run relationships, we consider a panel ECM with latent group structures so that all the stocks within a group share the same long-run relationship and do not otherwise. We extend the Classifier-Lasso method to the ECM to…