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Price discovery in the treasury futures market

✍ Scribed by Michael W. Brandt; Kenneth A. Kavajecz; Shane E. Underwood

Publisher
John Wiley and Sons
Year
2007
Tongue
English
Weight
165 KB
Volume
27
Category
Article
ISSN
0270-7314

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✦ Synopsis

Abstract

The paper conducts a regression analysis utilizing both futures and cash market prices and net orderflow to determine where price discovery takes place as well as the forces at play that influence the location. Specifically, given the strong theoretical linkage between the U.S. Treasury cash and futures markets, they compare how orderflow contributes to price discovery and analyze how and when information flows from one market to the other. How a number of environmental variables (trader type, financing rates, and liquidity) impact the information flows between these two markets is also considered. Their findings provide new evidence on the extent to which price discovery happens away from a primary market. Β© 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27: 1021–1051, 2007

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