IDEAS home Printed from https://ideas.repec.org/a/asi/aeafrj/2012p192-206.html
   My bibliography  Save this article

Market Liquidity Behaviour in Futures Markets: Empirical Evidence

Author

Listed:
  • Fathi ABID

    (Professor of Finance University of Sfax: UR: MO.DE.S.FI Faculty of Business and Economics of Sfax, TUNISIA)

  • Lotfi TRABELSI

    (Assistant professor of finance University of Sfax: UR: MO.DE.S.FI IHEC-Sfax)

Abstract

In this study, we examine the relations between the three keys variables of liquidity such as trading volume, bid-ask spread, and intraday price volatility. Hausman’s (1978) tests of specification confirmed that trading volume, bid-ask spread and intraday price volatility are jointly determined. Our study, leaded with a different approach to estimate the three parameters in a three-equation simultaneous structural model, confirm Hausman’s (1978) conclusions. Empirical analysis, based on eight financial futures contracts, the most actively traded futures contracts in the Chicago Board of Trade (CBT) and the Chicago Mercantile Exchange (CME) markets, use the generalized method of moments (GMM) procedure. Empirical results, supporting theoretical developments, indicate the existence of a simultaneous relationship between these three variables of financial markets liquidity.

Suggested Citation

  • Fathi ABID & Lotfi TRABELSI, 2012. "Market Liquidity Behaviour in Futures Markets: Empirical Evidence," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(1), pages 192-206, March.
  • Handle: RePEc:asi:aeafrj:2012:p:192-206
    as

    Download full text from publisher

    File URL: http://www.aessweb.com/download.php?id=1190
    Download Restriction: no

    File URL: http://www.aessweb.com/archives.php?m=March&id=1190
    Download Restriction: no

    References listed on IDEAS

    as
    1. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-155, January.
    2. Chiang, Raymond & Venkatesh, P C, 1988. " Insider Holdings and Perceptions of Information Asymmetry: A Note," Journal of Finance, American Finance Association, vol. 43(4), pages 1041-1048, September.
    3. Blume, Lawrence & Easley, David & O'Hara, Maureen, 1994. " Market Statistics and Technical Analysis: The Role of Volume," Journal of Finance, American Finance Association, vol. 49(1), pages 153-181, March.
    4. French, Kenneth R. & Roll, Richard, 1986. "Stock return variances : The arrival of information and the reaction of traders," Journal of Financial Economics, Elsevier, vol. 17(1), pages 5-26, September.
    5. Epps, Thomas W & Epps, Mary Lee, 1976. "The Stochastic Dependence of Security Price Changes and Transaction Volumes: Implications for the Mixture-of-Distributions Hypothesis," Econometrica, Econometric Society, vol. 44(2), pages 305-321, March.
    6. Amihud, Yakov & Mendelson, Haim, 1980. "Dealership market : Market-making with inventory," Journal of Financial Economics, Elsevier, vol. 8(1), pages 31-53, March.
    7. Copeland, Thomas E, 1976. "A Model of Asset Trading under the Assumption of Sequential Information Arrival," Journal of Finance, American Finance Association, vol. 31(4), pages 1149-1168, September.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:asi:aeafrj:2012:p:192-206. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qazi Muhammad Imran). General contact details of provider: http://www.aessweb.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.