Market Liquidity Behaviour in Futures Markets: Empirical Evidence
Journal Title: Asian Economic and Financial Review - Year 2012, Vol 2, Issue 1
Abstract
In this study, we examine the relations between the three keys variables of liquidity such as trading volume, bid-ask spread, and intraday price volatility. Hausman’s (1978) tests of specification confirmed that trading volume, bid-ask spread and intraday price volatility are jointly determined. Our study, leaded with a different approach to estimate the three parameters in a three-equation simultaneous structural model, confirm Hausman’s (1978) conclusions. Empirical analysis, based on eight financial futures contracts, the most actively traded futures contracts in the Chicago Board of Trade (CBT) and the Chicago Mercantile Exchange (CME) markets, use the generalized method of moments (GMM) procedure. Empirical results, supporting theoretical developments, indicate the existence of a simultaneous relationship between these three variables of financial markets liquidity.
Authors and Affiliations
Fathi ABID| Professor of Finance University of Sfax: UR: MO.DE.S.FI Faculty of Business and Economics of Sfax, TUNISIA, Lotfi TRABELSI| Assistant professor of finance University of Sfax: UR: MO.DE.S.FI IHEC-Sfax
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