Large Trades and Intraday Futures Price Behavior

Journal of Futures Markets, Vol. 28, No. 12, pp. 1147-1181, December 2008

49 Pages Posted: 18 Dec 2008

See all articles by Alex Frino

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Johan Bjursell

Credit Suisse AG

George H. K. Wang

George Mason University - Department of Finance

Andrew Lepone

University of Sydney; Financial Research Network (FIRN)

Abstract

This paper examines the effects of large trades executed by outside customer on the prices of futures contracts traded on the Chicago Mercantile Exchange. We find that, on average, large buyer-initiated trades have a larger permanent price impact (information effect) than large seller-initiated trades, while the opposite is found for the temporary price impact (liquidity effects) of large trades. These results are consistent with previous findings for block and institutional trades in equity markets. However, we also find that the information effects of large sells are larger than large buys in bearish markets, while the results are the reverse in bullish markets. The liquidity price effects of buys are larger than the liquidity price effects of sells in bearish markets whereas the reverse results hold in bullish markets. Our results are consistent with the hypothesis that the current economic condition is a key determinant of asymmetric price effects between large buys and large sells.

Keywords: Market Price Impacts, Liquidity Effects, Information Effects, Large Trades, Futures Price Behavior

JEL Classification: G10

Suggested Citation

Frino, Alex and Bjursell, Carl and Wang, George H. K. and Lepone, Andrew, Large Trades and Intraday Futures Price Behavior. Journal of Futures Markets, Vol. 28, No. 12, pp. 1147-1181, December 2008, Available at SSRN: https://ssrn.com/abstract=1317012

Alex Frino

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
+61 2 9299 1809 (Phone)
+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Carl Bjursell

Credit Suisse AG ( email )

CRTI 4
P.O. Box
Zurich, CH-8070
Switzerland

George H. K. Wang (Contact Author)

George Mason University - Department of Finance ( email )

Fairfax, VA 22030
United States

Andrew Lepone

University of Sydney ( email )

University of Sydney
Sydney NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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