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The value of liquidity: Evidence from the derivatives market

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  • Chan, Howard Wei-Hong
  • Pinder, Sean M.

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  • Chan, Howard Wei-Hong & Pinder, Sean M., 2000. "The value of liquidity: Evidence from the derivatives market," Pacific-Basin Finance Journal, Elsevier, vol. 8(3-4), pages 483-503, July.
    • Handle: RePEc:eee:pacfin:v:8:y:2000:i:3-4:p:483-503
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    1. Glosten, Lawrence R, 1987. "Components of the Bid-Ask Spread and the Statistical Properties of Transaction Prices," Journal of Finance, American Finance Association, vol. 42(5), pages 1293-1307, December.
    2. Marco Pagano, 1989. "Trading Volume and Asset Liquidity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 255-274.
    3. Forster, Margaret M. & George, Thomas J., 1992. "Anonymity in securities markets," Journal of Financial Intermediation, Elsevier, vol. 2(2), pages 168-206, June.
    4. Sanford J. Grossman & Merton H. Miller, 1988. "Liquidity and Market Structure," NBER Working Papers 2641, National Bureau of Economic Research, Inc.
    5. Foster, F Douglas & Viswanathan, S, 1993. "Variations in Trading Volume, Return Volatility, and Trading Costs: Evidence on Recent Price Formation Models," Journal of Finance, American Finance Association, vol. 48(1), pages 187-211, March.
    6. Bruce N. Lehmann and David M. Modest., 1994. "Trading and Liquidity on the Tokyo Stock Exchange: A Bird's Eye View," Research Program in Finance Working Papers RPF-234, University of California at Berkeley.
    7. repec:bla:jfinan:v:43:y:1988:i:3:p:617-37 is not listed on IDEAS
    8. Stoll, Hans R, 1978. "The Pricing of Security Dealer Services: An Empirical Study of NASDAQ Stocks," Journal of Finance, American Finance Association, vol. 33(4), pages 1153-1172, September.
    9. Tinic, Seha M. & West, Richard R., 1972. "Competition and the Pricing of Dealer Service in the Over-the-Counter Stock Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(3), pages 1707-1727, June.
    10. Seha M. Tinic, 1972. "The Economics of Liquidity Services," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(1), pages 79-93.
    11. McInish, Thomas H & Wood, Robert A, 1992. "An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks," Journal of Finance, American Finance Association, vol. 47(2), pages 753-764, June.
    12. Brock, William A. & Kleidon, Allan W., 1992. "Periodic market closure and trading volume : A model of intraday bids and asks," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 451-489.
    13. Paul Kofman & James Moser, 1997. "Spreads, information flows and transparency across trading systems," Applied Financial Economics, Taylor & Francis Journals, vol. 7(3), pages 281-294.
    14. Fishman, Michael J & Longstaff, Francis A, 1992. "Dual Trading in Futures Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 643-671, June.
    15. Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
    16. Datar, Vinay T. & Y. Naik, Narayan & Radcliffe, Robert, 1998. "Liquidity and stock returns: An alternative test," Journal of Financial Markets, Elsevier, vol. 1(2), pages 203-219, August.
    17. Eleswarapu, Venkat R. & Reinganum, Marc R., 1993. "The seasonal behavior of the liquidity premium in asset pricing," Journal of Financial Economics, Elsevier, vol. 34(3), pages 373-386, December.
    18. Grunbichler Andreas & Longstaff Francis A. & Schwartz Eduardo S., 1994. "Electronic Screen Trading and the Transmission of Information: An Empirical Examination," Journal of Financial Intermediation, Elsevier, vol. 3(2), pages 166-187, March.
    19. Lehmann, Bruce N & Modest, David M, 1994. "Trading and Liquidity on the Tokyo Stock Exchange: A Bird's Eye View," Journal of Finance, American Finance Association, vol. 49(3), pages 951-984, July.
    20. Chan, K C & Christie, William G & Schultz, Paul H, 1995. "Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities," The Journal of Business, University of Chicago Press, vol. 68(1), pages 35-60, January.
    21. Harold Demsetz, 1968. "The Cost of Transacting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(1), pages 33-53.
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    Citations

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    Cited by:

    1. Ter Horst, J.R. & Veld, C.H., 2002. "Behavioral Preferences for Individual Securities : The Case for Call Warrants and Call Options," Discussion Paper 2002-95, Tilburg University, Center for Economic Research.
    2. Wing-Keung Wong & Hooi Hoi Lean & Michael McAleer & Feng-Tse Tsai, 2018. "Why did Warrant Markets Close in China but not Taiwan?," Tinbergen Institute Discussion Papers 18-051/III, Tinbergen Institute.
    3. Giovanni Petrella & Reuben Segara, 2013. "The bid--ask spread of bank-issued options: a quantile regression analysis," Quantitative Finance, Taylor & Francis Journals, vol. 13(8), pages 1241-1255, July.
    4. Geoffrey Loudon & Kien Nguyen, 2006. "Evidence on the issuer effect in warrant overpricing," Applied Financial Economics, Taylor & Francis Journals, vol. 16(3), pages 223-232.
    5. Imtiaz Mohammad Sifat & Azhar Mohamad & Kevin Reinaldo Amin, 2021. "Intertemporal price discovery between stock index futures and spot markets: New evidence from high‐frequency data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 898-913, January.
    6. Bae, Kwangil & Lee, Soonhee, 2022. "Prices of derivative warrants considering their market characteristics and short-selling costs of underlying assets," Finance Research Letters, Elsevier, vol. 45(C).
    7. Jenke ter Horst & Chris Veld, 2008. "An Empirical Analysis of the Pricing of Bank Issued Options versus Options Exchange Options," European Financial Management, European Financial Management Association, vol. 14(2), pages 288-314, March.
    8. Sohnke M. Bartram & Frank R. Fehle, 2003. "Competition among Alternative Option Market Structures: Evidence from Eurex vs. Euwax," Finance 0307005, University Library of Munich, Germany, revised 06 Nov 2003.
    9. Chung, Huimin & Lee, Chin-Shen & Wu, Soushan, 2002. "The effects of model errors and market imperfections on financial institutions writing derivative warrants: Simulation evidence from Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 10(1), pages 55-75, January.
    10. Rossetto, Silvia & Bommel, Jos van, 2009. "Endless leverage certificates," Journal of Banking & Finance, Elsevier, vol. 33(8), pages 1543-1553, August.
    11. Bartram, Sohnke M. & Fehle, Frank, 2007. "Competition without fungibility: Evidence from alternative market structures for derivatives," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 659-677, March.
    12. Pinder, Sean, 2003. "An empirical examination of the impact of market microstructure changes on the determinants of option bid-ask spreads," International Review of Financial Analysis, Elsevier, vol. 12(5), pages 563-577.
    13. Joseph K. W. Fung & Ted Z. X. Zeng, 2012. "Are Derivative Warrants Overpriced?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 32(12), pages 1144-1170, December.
    14. Xuejun Jin & Jingyu Zhao & Xingguo Luo, 2022. "Why are the prices of European‐style derivatives greater than the prices of American‐style derivatives?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(9), pages 1772-1793, September.
    15. Sohnke M. Bartram & Frank R. Fehle, 2003. "Alternative Market Structures for Derivatives," Finance 0311007, University Library of Munich, Germany, revised 12 Dec 2003.
    16. Chan, Chia-Ying & de Peretti, Christian & Qiao, Zhuo & Wong, Wing-Keung, 2012. "Empirical test of the efficiency of the UK covered warrants market: Stochastic dominance and likelihood ratio test approach," Journal of Empirical Finance, Elsevier, vol. 19(1), pages 162-174.
    17. Wing-Keung Wong & Hooi Hooi Lean & Michael McAleer & Feng-Tse Tsai, 2018. "Why Are Warrant Markets Sustained in Taiwan but Not in China?," Sustainability, MDPI, vol. 10(10), pages 1-17, October.

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