Spread Components in the Hungarian Forint-Euro Market
AbstractWe apply the spread decomposition model by Huang and Stoll (1997) to a new data set on the Hungarian forint/euro interbank market. In contrast to previous results, we cover a minor market over a long time span. We find a significant inventory effect, and we find that spread size significantly increases with trade size. Overall, this work confirms the predictions from various theoretical models on a small and less-liquid market. In comparison with other studies, the size of the market, institutional differences between markets, and specificities of the data set seem to play an important role.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.
Volume (Year): 48 (2012)
Issue (Month): 3 (May)
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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024
adverse selection; foreign exchange; Hungary; inventory; microstructure; spread;
Other versions of this item:
- M. Frömmel & F. Van Gysegem, 2011. "Spread Components in the Hungarian Forint-Euro Market," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/709, Ghent University, Faculty of Economics and Business Administration.
- Frederick Van Gysegem & Michael Frömmel, 2011. "Spread Components in the Hungarian Forint-Euro Market," 2011 Meeting Papers 1260, Society for Economic Dynamics.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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