Vector error correction models (VECMs); information shares; market microstructure; independent component analysis; pseudo maximum likelihood; price discovery.

C32, C58, G14

We propose a new measure of price discovery, which we will refer to as the Independent Component based Information Share (IC-IS). This measure constitutes a variant of the widespread Information Share, with the main difference being it does not suffer the same identification issues. Under the assumptions of non-normality of the shocks, a rather general theoretical framework leading to the definition of the IC-IS and its estimation via a pseudo maximum likelihood (PML) approach is illustrated. After testing the robustness of the measure in a Montecarlo simulation environment, we illustrate two separate empirical analyses encompassing different price discovery applications.