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Do spot market auction data help price discovery?

Author

Listed:
  • Adrian Fernandez-Perez

    (AUT - Auckland University of Technology)

  • Joëlle Miffre

    (Audencia Business School)

  • Tilman Schoen

    (Mars Food)

  • Ayesha Scott

    (AUT - Auckland University of Technology)

Abstract

This paper contributes to the price discovery literature by establishing, for the first time, the role of commodity spot market auction data. Using the New Zealand whole milk powder market as an example, we show that auction-level data explain the price discovery dynamics above and beyond determinants previously identified as being relevant to spot and futures market price formation. In particular, the price discovery of the futures market rises with the volume of dairy products traded at the auction, signaling that the volume auctioned induces a change in the trading strategies of futures market participants. The whole milk powder discovery process is found to primarily take place in the spot market, which aligns well with the auction predating the introduction of the futures market, its higher volume, and lower trading costs.

Suggested Citation

  • Adrian Fernandez-Perez & Joëlle Miffre & Tilman Schoen & Ayesha Scott, 2023. "Do spot market auction data help price discovery?," Post-Print hal-04121327, HAL.
    • Handle: RePEc:hal:journl:hal-04121327
    DOI: 10.1016/j.jcomm.2023.100335
    Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-04121327
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    References listed on IDEAS

    as
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    Keywords

    Price discovery; Auction data; Dairy products; Spot and futures markets;
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