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Liquidity in the Futures Pits: Inferring Market Dynamics from Incomplete Data

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  • Joel Hasbrouck

Abstract

Motivated by economic models of sequential trade, empirical analyses of market dynamics in the U.S. equities market frequently estimate liquidity from regressions of price changes on transaction volumes, where the latter are signed (positive for buyer-initiated trades; negative for seller-initiated trades). This paper estimates these specification for transaction data from pit trading at the Chicago Mercantile Exchange. To deal with the absence of timely bid and ask quotes (generally used to sign trades in the equity market studies); this paper proposes new techniques based on Markov chain Monte Carlo estimation.

Suggested Citation

  • Joel Hasbrouck, 1998. "Liquidity in the Futures Pits: Inferring Market Dynamics from Incomplete Data," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-076, New York University, Leonard N. Stern School of Business-.
    • Handle: RePEc:fth:nystfi:98-076
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    References listed on IDEAS

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    Cited by:

    1. Oehler, Andreas & Häcker, Mirko, 2003. "Kurseinfluss mittlerer und großer Transaktionen am deutschen Aktienmarkt," Discussion Papers 20, University of Bamberg, Chair of Finance.
    2. Frino, Alex & Jarnecic, Elvis, 2000. "An empirical analysis of the supply of liquidity by locals in futures markets: Evidence from the Sydney Futures Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 8(3-4), pages 443-456, July.

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