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Determinants and information content of intraday bid-ask spreads: Evidence from Chinese commodity futures markets

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  • Liu, Qingfu
  • Hua, Renhai
  • An, Yunbi

Abstract

This paper investigates the way in which intraday bid-ask spreads are related to trading volume, volatility, skewness, as well as kurtosis for commodity futures on copper, aluminum, gold, and rubber in China. We show that bid-ask spreads are generally negatively related to trading volume and skewness, but positively related to volatility and kurtosis. In addition, the effects of trading volume, volatility, and skewness are stronger than those of kurtosis. Moreover, using a threshold regression model, we document that these relations exhibit asymmetries with regard to good versus bad news, large versus small volatility, positive versus negative skewness, as well as high versus low kurtosis. While these asymmetric effects vary across futures, we find some common patterns, and provide economic explanations for the observed asymmetric relations.

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  • Liu, Qingfu & Hua, Renhai & An, Yunbi, 2016. "Determinants and information content of intraday bid-ask spreads: Evidence from Chinese commodity futures markets," Pacific-Basin Finance Journal, Elsevier, vol. 38(C), pages 135-148.
    • Handle: RePEc:eee:pacfin:v:38:y:2016:i:c:p:135-148
    DOI: 10.1016/j.pacfin.2016.04.002
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