An Analysis of Trader Activity During Limit-Move Events in Live Cattle Futures

Rob Murphy and Wayne Purcell

No 285638, 1981-1999 Conference Archive from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: Price limits in futures markets can inhibit discovery of the market-clearing equilibrium price. This study examines the price discovery contribution of six broad groups of traders during limit-move events in live cattle futures. A quantitative measure of the daily net price pressure exerted by each trader group was developed and used to identify trader activity on and around limit moves. Results indicate that, overall, limit moves are more likely to improve price discovery than to hurt it. Positive limit moves strongly enhance price discovery while negative limit moves tend be more harmful. A group composed of commodity pool and commission house traders were best at anticipating limit moves while large speculators were more likely to have a hand in causing them. No trader group consistently outperformed the others in exerting pressure benefcial to the price discovery process during limit-move events.

Keywords: Marketing (search for similar items in EconPapers)
Date: 1995-04
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nc8191:285638

DOI: 10.22004/ag.econ.285638

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