An Analysis of Own Account Trading by Dual Traders in Futures Markets: A Bayesian Approach
AbstractUsing an audit trail transaction data set compiled by the Commodity Futures Trading Commission (CFTC), we seek to ascertain directly the motives behind dual traders’ own account trading and whether or not they are informed traders. We estimate our system of equations on each of the 101 most active dual traders in the data, using the Markov chain Monte Carlo (MCMC) method. We find that dual traders are informed traders who do not appear to piggyback off their customers’ trades; whose own account trading reflects inventory control; and who appear to be liquidity suppliers. We also show that dual traders are heterogeneous in terms of their trading skills and other trade-related characteristics.
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Bibliographic InfoPaper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1127.
Length: 52 pages
Date of creation: Feb 2000
Date of revision:
informed trader ; liquidity supplier ; inventory control ; endogeneity ; heterogeneity ; Markov chain Monte Carlo ; simultaneous equations;
Find related papers by JEL classification:
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
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