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Measuring commodity market quality

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  • Lauter, Tobias
  • Prokopczuk, Marcel

Abstract

In this paper, we identify the most suitable low-frequency proxies for analyzing commodity market quality. We use an 11-year sample of millisecond time-stamped order book data and examine the correlation of high-frequency liquidity and price efficiency measures with their low-frequency proxies measured with daily or 5-min Time-and-Sales (TAS) data. We find that for liquidity, the volatility-over-volume measures are the best proxies for bid–ask spread and price impact. The correlation of price efficiency measures with their daily-frequency counterparts is low. Moderately correlated proxies can be achieved by using 5-min data.

Suggested Citation

  • Lauter, Tobias & Prokopczuk, Marcel, 2022. "Measuring commodity market quality," Journal of Banking & Finance, Elsevier, vol. 145(C).
    • Handle: RePEc:eee:jbfina:v:145:y:2022:i:c:s0378426622002382
    DOI: 10.1016/j.jbankfin.2022.106658
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    1. Prokopczuk, Marcel & Symeonidis, Lazaros & Wese Simen, Chardin & Wichmann, Robert, 2023. "Convenience yield risk," Energy Economics, Elsevier, vol. 120(C).
    2. Bohl, Martin T. & Irwin, Scott H. & Pütz, Alexander & Sulewski, Christoph, 2023. "The impact of financialization on the efficiency of commodity futures markets," Journal of Commodity Markets, Elsevier, vol. 31(C).

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    More about this item

    Keywords

    Commodity markets; Market quality; Liquidity; Market efficiency; High-frequency data;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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