Liquidity and The Law on One Price : The Case of The Futures - Cash Basis  

Oleh:

Roll, Richard ; Schwartz, Eduardo ; Subrahmanyam, Avanidhar

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 62 no. 5 (Oct. 2007), page 2201-2234.
Topik: liquidity; liquidity; law of one price; future - cash basis
Fulltext: p 2201.pdf (297.14KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

Deviations form no - arbitrage relations should be related to market liquidity, because liquidity facilitates arbitrage. At the same time, a wide futures - cash basis may trigger arbitrage trades and in turn, affect liquidity. We test these ideas by studying the dynamic relation between stock market liquidity and the index future basis. There is evidence of two - way granger causality between the short - term absolute basis and liquidity, and liquidity granger - causes longer - term absolute bases. Shocks to the absolute basis predict future stock market liquidity. The evidence suggests that liquidity enhances the efficiency of the futures - cash pricing system.

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