Duration, trading volume and the price impact of trades in an emerging futures market

Michael Bowe; Stuart Hyde; Lavern McFarlane

doi:10.1016/j.ememar.2013.08.002

Duration, trading volume and the price impact of trades in an emerging futures market

Michael Bowe, Stuart Hyde, Lavern McFarlane

A&F Accounting & Finance

Research output: Contribution to journal › Article › peer-review

Abstract

This paper examines the price impact of trading intensity on the MexDer TIIE28 interest rate futures contract, one of the world's most actively traded contracts. A novel volume-augmented duration model of price discovery decomposes trading intensity into liquidity and information components. Duration between transactions exerts a positive influence on price changes, while increases in order flow and trade volume exert positive and negative influences, respectively. The liquidity component dominates the information measure, suggesting that liquidity considerations dictate trade timing. These findings are rationalized with reference to MexDer's organizational structure, specifically the affirmative obligations placed upon marketmakers to trade a minimum volume. © 2013 Elsevier B.V.

Original language	English
Pages (from-to)	89-105
Number of pages	16
Journal	Emerging Markets Review
Volume	17
DOIs	https://doi.org/10.1016/j.ememar.2013.08.002
Publication status	Published - Dec 2013

Keywords

Autoregressive conditional duration
Autoregressive conditional volume
Liquidity
Marketmaker obligations

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10.1016/j.ememar.2013.08.002

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title = "Duration, trading volume and the price impact of trades in an emerging futures market",

abstract = "This paper examines the price impact of trading intensity on the MexDer TIIE28 interest rate futures contract, one of the world's most actively traded contracts. A novel volume-augmented duration model of price discovery decomposes trading intensity into liquidity and information components. Duration between transactions exerts a positive influence on price changes, while increases in order flow and trade volume exert positive and negative influences, respectively. The liquidity component dominates the information measure, suggesting that liquidity considerations dictate trade timing. These findings are rationalized with reference to MexDer's organizational structure, specifically the affirmative obligations placed upon marketmakers to trade a minimum volume. {\textcopyright} 2013 Elsevier B.V.",

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AU - Hyde, Stuart

AU - McFarlane, Lavern

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N2 - This paper examines the price impact of trading intensity on the MexDer TIIE28 interest rate futures contract, one of the world's most actively traded contracts. A novel volume-augmented duration model of price discovery decomposes trading intensity into liquidity and information components. Duration between transactions exerts a positive influence on price changes, while increases in order flow and trade volume exert positive and negative influences, respectively. The liquidity component dominates the information measure, suggesting that liquidity considerations dictate trade timing. These findings are rationalized with reference to MexDer's organizational structure, specifically the affirmative obligations placed upon marketmakers to trade a minimum volume. © 2013 Elsevier B.V.

AB - This paper examines the price impact of trading intensity on the MexDer TIIE28 interest rate futures contract, one of the world's most actively traded contracts. A novel volume-augmented duration model of price discovery decomposes trading intensity into liquidity and information components. Duration between transactions exerts a positive influence on price changes, while increases in order flow and trade volume exert positive and negative influences, respectively. The liquidity component dominates the information measure, suggesting that liquidity considerations dictate trade timing. These findings are rationalized with reference to MexDer's organizational structure, specifically the affirmative obligations placed upon marketmakers to trade a minimum volume. © 2013 Elsevier B.V.

KW - Autoregressive conditional duration

KW - Autoregressive conditional volume

KW - Liquidity

KW - Marketmaker obligations

U2 - 10.1016/j.ememar.2013.08.002

DO - 10.1016/j.ememar.2013.08.002

M3 - Article

SN - 1566-0141

VL - 17

SP - 89

EP - 105

JO - Emerging Markets Review

JF - Emerging Markets Review

ER -

Duration, trading volume and the price impact of trades in an emerging futures market

Abstract

Keywords

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