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Bid‐ask spreads, volatility, quote revisions, and trades of thinly traded futures contracts
Author(s) -
Ding David K.,
Charoenwong Charlie
Publication year - 2003
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.10071
Subject(s) - futures contract , volatility (finance) , market liquidity , equity (law) , financial economics , economics , bid price , monetary economics , business , econometrics , finance , political science , law
We investigate intraday bid‐ask spreads (BAS), volatility, and trading activity of thinlytraded equity index futures contracts on the Singapore Exchange. Contrary to previous findings, we find a ratherflat BAS pattern during the trading day. However, consistent with past findings, an increase in risk widens thespread and a higher trading activity reduces it. When trading occurs in a day, spreads are reduced. Nosignificant difference in volatility between days with and without trades was detected. When trades occur, quoterevisions increase, and it is positively related to the number of trades. An increase in the number of quoterevisions increases the likelihood of a transaction, and when quotes are current, revisions that are accompaniedby trades carry new information. We provide evidence that contracts that are thinly traded may possess liquidityattributes as long as their price quotes remain current. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark23:455–486, 2003