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Bid-Ask Spreads, Volume, and Volatility: Evidence from Livestock Markets

Julieta Frank and Philip Garcia

No 49575, 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin from Agricultural and Applied Economics Association

Abstract: Understanding the determinants of liquidity costs in agricultural futures markets is hampered by a need to use proxies for the bid-ask spread which are often biased, and by a failure to account for a jointly determined micro-market structure. We estimate liquidity costs and its determinants for the live cattle and hog futures markets using alternative liquidity cost estimators, intraday prices and micro-market information. Volume and volatility are simultaneously determined and significantly related to the bid-ask spread. Daily volume is negatively related to the spread while volatility and volume per transaction display positive relationships. Electronic trading has a significant competitive effect on liquidity costs, particularly in the live cattle market. Results are sensitive to the bid-ask spread measure, with a modified Bayesian method providing estimates most consistent with expectations and the competitive structure found in these markets.

Keywords: Livestock Production/Industries; Marketing (search for similar items in EconPapers)
Pages: 42
Date: 2009
New Economics Papers: this item is included in nep-mst
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Journal Article: Bid-Ask Spreads, Volume, and Volatility: Evidence from Livestock Markets (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea09:49575

DOI: 10.22004/ag.econ.49575

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