Three Essays on Market Depth in Futures Markets


Autoria(s): Aidov, Alexandre
Data(s)

02/08/2013

Resumo

Liquidity is an important market characteristic for participants in every financial market. One of the three components of liquidity is market depth. Prior literature lacks a comprehensive analysis of depth in U.S. futures markets due to past limitations on the availability of data. However, recent innovations in data collection and dissemination provide new opportunities to investigate the depth dimension of liquidity. In this dissertation, the Chicago Mercantile Exchange (CME) Group proprietary database on depth is employed to study the dynamics of depth in the U.S. futures markets. This database allows for the analysis of depth along the entire limit order book rather than just at the first level. The first essay examines the characteristics of depth within the context of the five-deep limit order book. Results show that a large amount of depth is present in the book beyond the best level. Furthermore, the findings show that the characteristics of five-deep depth between day and night trading vary and that depth is unequal across levels within the limit order book. The second essay examines the link between the five-deep market depth and the bid-ask spread. The results suggest an inverse relation between the spread and the depth after adjusting for control factors. The third essay explores transitory volatility in relation to depth in the limit order book. Evidence supports the relation between an increase in volatility and a subsequent decrease in market depth. Overall, the results of this dissertation are consistent with limit order traders actively managing depth along the limit order book in electronic U.S. futures markets.

Formato

application/pdf

Identificador

https://digitalcommons.fiu.edu/etd/974

https://digitalcommons.fiu.edu/cgi/viewcontent.cgi?article=2091&context=etd

Publicador

FIU Digital Commons

Fonte

FIU Electronic Theses and Dissertations

Palavras-Chave #Market Depth #Futures Markets #Microstructure #Finance and Financial Management
Tipo

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