Commodity Liquidity Measurement and Transaction Costs
We examine the performance of liquidity proxies in commodities. The Amihud measure has the largest correlation with liquidity benchmarks. Amivest and Effective Tick measures also perform well. These proxies are useful for studies of commodity liquidity over a long time period and those that lack access to high-frequency data. We use various aspects of transaction costs, such as spread, depth, immediacy, and resiliency, to give insight into the costs of different execution approaches. Transaction costs increase with volatility and exhibit mean reversion. Splitting trades over one hour can reduce trading costs by two-thirds compared to an immediate execution. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: email@example.com., Oxford University Press.
Volume (Year): 25 (2012)
Issue (Month): 2 ()
|Contact details of provider:|| Postal: |
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC
|Order Information:||Web: http://www4.oup.co.uk/revfin/subinfo/|
When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:25:y:2012:i:2:p:599-638. 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: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.