Spread Components in the Hungarian Forint-Euro Market
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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Volume (Year): 48 (2012)
Issue (Month): 3 (May)
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