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

Michael Bowe, Stuart Hyde and Lavern McFarlane

Emerging Markets Review, 2013, vol. 17, issue C, 89-105

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.

Keywords: Duration; Autoregressive conditional volume; Autoregressive conditional duration; Liquidity; Marketmaker obligations (search for similar items in EconPapers)
JEL-codes: C32 G14 G15 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014113000526
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:17:y:2013:i:c:p:89-105

DOI: 10.1016/j.ememar.2013.08.002

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().