Abstract
This study examines the informativeness of trades and quotes in the FTSE 100 index futures market. Using a tick time model, we decompose the innovation in the efficient price into a trade-induced and a quote-induced part. For the extensive time period from 2001 to 2011, we find that trades are highly informative, explaining about 80% of the innovation in the efficient price. Large trades are more informative than smaller trades. We observe a noticeable upward trend in the contribution of trades, but also notice large drops in price informativeness around the recent global financial crisis and the European debt crisis. These drops could be attributed to noise trading during volatile periods.
| Original language | English |
|---|---|
| Pages (from-to) | 105-126 |
| Number of pages | 22 |
| Journal | Journal of Futures Markets |
| Volume | 35 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 1 Feb 2015 |
| Externally published | Yes |