Abstract

http://ssrn.com/abstract=2026802
 
 

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Predatory or Sunshine Trading? Evidence from Crude Oil ETF Rolls


Hendrik Bessembinder


University of Utah - Department of Finance

Allen Carrion


Lehigh University

Laura A. Tuttle


U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis

Kumar Venkataraman


Southern Methodist University (SMU) - Edwin L. Cox School of Business

March 5, 2014


Abstract:     
We study prices, liquidity, and individual account trading activity around large and predictable ETF “roll” trades in crude oil futures markets. We find narrower bid-ask spreads, greater order book depth, and more trading accounts providing liquidity on roll dates. We estimate that the largest ETF tracking crude oil prices effectively pays round-trip trading costs that average 25 basis points. Overall, the evidence indicates that traders effectively provide liquidity rather than follow predatory strategies in this “resilient” market, as implied by sunshine trading theories and by our modified theory of strategic trading around a predictable liquidation.

Number of Pages in PDF File: 57

Keywords: predatory trading, sunshine trading, trading costs, resiliency, ETFs, crude oil, energy, commodities, futures

JEL Classification: G1, G2

working papers series


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Date posted: March 23, 2012 ; Last revised: March 6, 2014

Suggested Citation

Bessembinder, Hendrik and Carrion, Allen and Tuttle, Laura A. and Venkataraman, Kumar, Predatory or Sunshine Trading? Evidence from Crude Oil ETF Rolls (March 5, 2014). Available at SSRN: http://ssrn.com/abstract=2026802 or http://dx.doi.org/10.2139/ssrn.2026802

Contact Information

Hendrik (Hank) Bessembinder (Contact Author)
University of Utah - Department of Finance ( email )
David Eccles School of Business
Salt Lake City, UT 84112
United States
Allen Carrion
Lehigh University ( email )
Bethlehem, PA 18015
United States
Laura A. Tuttle
U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis ( email )
United States Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
United States
202-551-6544 (Phone)
Kumar Venkataraman
Southern Methodist University (SMU) - Edwin L. Cox School of Business ( email )
P.O. Box 750333
Dallas, TX 75275-0333
United States
214-768-7005 (Phone)
214-768-4099 (Fax)
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