Depth and Tightness

Posted: 3 May 1998

See all articles by Michael F. Ferguson

Michael F. Ferguson

University of Cincinnati - Department of Finance - Real Estate

Steven C. Mann

Texas Christian University - M.J. Neeley School of Business

Len Schneck

University of Dayton

Date Written: December 1995

Abstract

We analyze futures market liquidity using audit trail data that allows for direct calculation of market attributes such as depth, spread and spread-free volatility. Depth is relatively stable throughout the trading day, in particular contrast to customer spreads, which are much higher at open and close, consistent with equity market evidence. Interestingly, spreads are larger at market close even for futures with substantial reductions in price volatility throughout the day. We present evidence consistent with the view that market power and inventory considerations are responsible for increased closing spreads.

JEL Classification: G13

Suggested Citation

Ferguson, Michael F. and Mann, Steven Carl and Schneck, Leonard Joseph, Depth and Tightness (December 1995 ). Available at SSRN: https://ssrn.com/abstract=7635

Michael F. Ferguson

University of Cincinnati - Department of Finance - Real Estate ( email )

College of Business Administration
Cincinnati, OH 45221
United States
513-556-7080 (Phone)

Steven Carl Mann

Texas Christian University - M.J. Neeley School of Business ( email )

Campus Box 298530
Fort Worth, TX 76129
United States
817-257-7569 (Phone)
817-257-7227 (Fax)

Leonard Joseph Schneck (Contact Author)

University of Dayton ( email )

300 College Park
Dayton, OH 45469
United States
937 229 3595 (Phone)
937 229 2477 (Fax)

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