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Comparison Of Liquidity Costs Between The Kansas City And Chicago Wheat Futures Contracts

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Author Info

  • Thompson, Sarahelen R.
  • Eales, James S.
  • Seibold, David

Abstract

The objectives of this study were to: (a) quantify differences in liquidity costs between Kansas City and Chicago wheat futures contracts, and (b) identify the factors which influence liquidity in these two markets. Regression results suggest that there are significant differences in liquidity costs between Chicago and Kansas City which are in part due to the lower trading volume at Kansas City. However, there appears to be a significantly higher cost of doing business at Kansas City which is independent of trading volume. The implications of these findings to traders is that transacting is more expensive in Kansas City than in Chicago.

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Bibliographic Info

Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 18 (1993)
Issue (Month): 02 (December)
Pages:

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Handle: RePEc:ags:jlaare:30965

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Web page: http://waeaonline.org/
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Related research

Keywords: Marketing;

References

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  1. Tinic, Seha M, 1972. "The Economics of Liquidity Services," The Quarterly Journal of Economics, MIT Press, vol. 86(1), pages 79-93, February.
  2. Thompson, S.R. & Liu, S.M., 1991. "The Price Adjustment Process and Efficiency of Grain Futures Markets Implied by return Series of Various Time Intervals," Papers 216, Columbia - Center for Futures Markets.
  3. Thompson, S. & Waller, M.L., 1988. "Determinants Of Liquidity Costs In Commodity Furures Markets," Papers 172, Columbia - Center for Futures Markets.
  4. Wilson, William W., 1982. "Hedging Effectiveness of U.S. Wheat Futures Markets," Agricultural Economics Reports 23215, North Dakota State University, Department of Agribusiness and Applied Economics.
  5. George, Thomas J & Kaul, Gautam & Nimalendran, M, 1991. "Estimation of the Bid-Ask Spread and Its Components: A New Approach," Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 623-56.
  6. Shah, Samarth & Brorsen, B. Wade & Anderson, Kim B., 2009. "Liquidity Costs in Futures Options Markets," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53047, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
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Citations

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Cited by:
  1. B. Wade Brorsen & John Coombs & Kim Anderson, 1995. "The cost of forward contracting wheat," Agribusiness, John Wiley & Sons, Ltd., vol. 11(4), pages 349-354.
  2. Joost M. E. Pennings & Matthew T. G. Meulenberg, 1997. "The hedging performance in new agricultural futures markets: A note," Agribusiness, John Wiley & Sons, Ltd., vol. 13(3), pages 295-300.
  3. Park, Cheol-Ho & Irwin, Scott H., 2005. "The Profitability of Technical Trading Rules in US Futures Markets: A Data Snooping Free Test," AgMAS Project Research Reports 14771, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  4. Shah, Samarth & Brorsen, B. Wade & Anderson, Kim B., 2009. "Liquidity Costs in Futures Options Markets," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53047, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  5. Henry Bryant & Michael Haigh, 2004. "Bid-ask spreads in commodity futures markets," Applied Financial Economics, Taylor & Francis Journals, vol. 14(13), pages 923-936.
  6. Frank, Julieta & Garcia, Philip, 2007. "Measuring Liquidity Costs in Agricultural Futures Markets," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37572, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  7. Bryant, Henry L. & Haigh, Michael S., 2002. "Bid-Ask Spreads In Commodity Futures Markets," Working Papers 28587, University of Maryland, Department of Agricultural and Resource Economics.
  8. Good, Darrel L. & Irwin, Scott H. & Martines-Filho, Joao & Hagedorn, Lewis A., 2005. "The Pricing Performance of Market Advisory Services in Corn and Soybeans over 1995-2003," AgMAS Project Research Reports 14775, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  9. Irwin, Scott H. & Good, Darrel L. & Martines-Filho, Joao & Batts, Ryan M., 2006. "The Pricing Performance of Market Advisory Services in Corn and Soybeans Over 1995-2004," AgMAS Project Research Reports 37513, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  10. Yiuman Tse & Paramita Bandyopadhyay, 2006. "Multi-market trading in the Eurodollar futures market," Review of Quantitative Finance and Accounting, Springer, vol. 26(3), pages 321-341, May.
  11. Frank, Julieta & Garcia, Philip, 2009. "Bid-Ask Spreads, Volume, and Volatility: Evidence from Livestock Markets," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49575, Agricultural and Applied Economics Association.
  12. Bryant, Henry L. & Haigh, Michael S., 2001. "Estimating Actual Bid-Ask Spreads In Commodity Futures Markets," 2001 Annual meeting, August 5-8, Chicago, IL 20707, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  13. Thompson, Sarahelen R. & Kunda, Eugene L., 2000. "The Role Of Organized Exchanges And Standardized Contracts In Marketing New Commodities," 2000 Producer marketing and Risk Management Conference, January 13-14, Orlando, FL 19575, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  14. Lien, Donald & Yang, Li, 2008. "Asymmetric effect of basis on dynamic futures hedging: Empirical evidence from commodity markets," Journal of Banking & Finance, Elsevier, vol. 32(2), pages 187-198, February.

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