Price discovery share: An order invariant measure of price discovery

To address the order-dependence issue in Hasbrouck's (1995) Information Share (IS) measure, which assesses a market's contribution to price discovery, we propose a new metric called the Price Discovery Share (PDS). The PDS is straightforward to compute, easy to interpret, order invariant, and unique. Our measure is inspired by a commonly used method in portfolio risk management that decomposes portfolio volatility into specific contributions from each asset. Through analytical methods and simulations, we demonstrate that the PDS measure offers significant advantages over both the original IS measure and the Modified Information Share (MIS) measure proposed by Lien and Shrestha (2009).