Publication Type

Journal Article

Version

acceptedVersion

Publication Date

5-1999

Abstract

This paper investigates and analyzes the intraday and daily determinants of bid-ask spreads in the foreign exchange futures market. It is found that the number of transactions is negatively related to the BAS, whereas volatility in general is positively related to it. The study also finds that there are economies of scale in trading FXF contracts. The intraday BAS follows a U-shaped pattern, and they tend to be higher on Mondays and Tuesdays than on other days of the week. Higher spreads at the beginning and end of a trading day are consistent with the presence of adverse selection and the avoidance of the possibility of carrying undesirable inventory overnight, respectively. Seasonal differences in BASs that are related to the delivery date of a contract are also found.

Keywords

Bid-ask spreads, transaction prices, rate risk, components, liquidity, costs

Discipline

Business | Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Journal of Futures Markets

Volume

19

Issue

3

First Page

307

Last Page

324

ISSN

0270-7314

Identifier

10.1002/(SICI)1096-9934(199905)19:3<307::AID-FUT4>3.0.CO;2-5

Publisher

Wiley

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1002/(SICI)1096-9934(199905)19:3<307::AID-FUT4>3.0.CO;2-5

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