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Spread Components in the Hungarian Forint-Euro Market

  • Michael Frömmel
  • Frederick Van Gysegem

We 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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Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 48 (2012)
Issue (Month): 3 (May)
Pages: 52-69

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Handle: RePEc:mes:emfitr:v:48:y:2012:i:3:p:52-69
Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

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