The Price Path Due to Order Imbalances: Evidence from the Amsterdam Agricultural Futures Exchange

European Financial Management

Posted: 8 May 1997

See all articles by Joost M. E. Pennings

Joost M. E. Pennings

Maastricht University; Wageningen UR

W. Erno Kuiper

Wageningen UR

Frenkel ter Hofstede

Carnegie Mellon University - David A. Tepper School of Business

Matthew T.G. Meulenberg

Wageningen UR

Abstract

The lack of sufficient market depth particularly in many newly initiated futures markets results in relatively high hedging costs, and this inhibits the growth of futures contract volume. In this article the price path due to order imbalances is analyzed and a two-dimensional market depth measure is derived. Understanding the underlying structure of futures market depth provides the management of the futures exchange with a framework for improving their market depth and gives hedgers a better understanding of market depth risk. The managerial implications of our findings are demonstrated empirically using data from the Amsterdam Agricultural Futures Exchange.

JEL Classification: G10, G20

Suggested Citation

Pennings, Joost M. E. and Kuiper, W. Erno and ter Hofstede, Frenkel and Meulenberg, Matthew T.G., The Price Path Due to Order Imbalances: Evidence from the Amsterdam Agricultural Futures Exchange. European Financial Management. Available at SSRN: https://ssrn.com/abstract=43906

Joost M. E. Pennings (Contact Author)

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Wageningen UR ( email )

Hollandseweg 1
Wageningen, 6706KN
Netherlands

W. Erno Kuiper

Wageningen UR

Hollandseweg 1
6706 KN
Wageningen
Netherlands

Frenkel Ter Hofstede

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Matthew T.G. Meulenberg

Wageningen UR ( email )

Hollandseweg 1
6706 KN Department of Marketing and Marketing Research
Wageningen
Netherlands
31-317-482205 (Phone)
31-317-484361 (Fax)

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