We are grateful to an anonymous referee, Bob Webb (editor), Steven Li (discussant), and the participants at the International Conference on Futures and Other Derivative Markets in Beijing, China for valuable comments.
The Informativeness of Trades and Quotes in the FTSE 100 Index Futures Market
Article first published online: 17 FEB 2014
© 2014 Wiley Periodicals, Inc.
Journal of Futures Markets
Volume 35, Issue 2, pages 105–126, February 2015
How to Cite
Frijns, B. and Tse, Y. (2015), The Informativeness of Trades and Quotes in the FTSE 100 Index Futures Market. J. Fut. Mark., 35: 105–126. doi: 10.1002/fut.21652
- Issue published online: 6 JAN 2015
- Article first published online: 17 FEB 2014
- Manuscript Accepted: 22 DEC 2013
- Manuscript Received: 19 DEC 2012
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. © 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:105–126, 2015