- Publication date : 2010-01-01
Reference
¸Frank, Julieta, and Philip Garcia. Bid-Ask Spreads, Volume, and Volatility: Evidence from Livestock Markets. American Journal of Agricultural Economics. Advance Access published online December 21, 2010, doi:10.1093/ajae/aaq116
Abstract
Using literature-based measures and a modified Bayesian method specified here, we estimate liquidity costs and their determinants for the live cattle and hog futures markets. Volume and volatility are simultaneously determined and significantly related to the bid-ask spread. Daily volume is negatively related to the spread while volatility and average volume per transaction display positive relationships. Electronic trading has a significant competitive effect on liquidity costs, particularly in the live cattle market. Results are sensitive to the bid-ask spread measure, with our modified Bayesian method providing estimates most consistent with expectations and the competitive structure in these markets.
