Liquidity in the Futures Pits: Inferring Market Dynamics from Incomplete Data
AbstractMotivated by economic models of sequential trade, empirical analyses of market dynamics in the U.S. equities market frequently estimate liquidity from regressions of price changes on transaction volumes, where the latter are signed (positive for buyer-initiated trades; negative for seller-initiated trades). This paper estimates these specification for transaction data from pit trading at the Chicago Mercantile Exchange. To deal with the absence of timely bid and ask quotes (generally used to sign trades in the equity market studies); this paper proposes new techniques based on Markov chain Monte Carlo estimation.
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Bibliographic InfoPaper provided by New York University, Leonard N. Stern School of Business- in its series New York University, Leonard N. Stern School Finance Department Working Paper Seires with number 98-076.
Date of creation: 14 Aug 1998
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