A note on execution costs for stock index futures: Information versus liquidity effects

Berkman, H., Brailsford, T. J. and Frino, A. (2005) A note on execution costs for stock index futures: Information versus liquidity effects. Journal of Banking and Finance, 29 3: 565-577. doi:10.1016/j.jbankfin.2004.05.019

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Author Berkman, H.
Brailsford, T. J.
Frino, A.
Title A note on execution costs for stock index futures: Information versus liquidity effects
Journal name Journal of Banking and Finance   Check publisher's open access policy
ISSN 0378-4266
Publication date 2005-01-01
Sub-type Article (original research)
DOI 10.1016/j.jbankfin.2004.05.019
Volume 29
Issue 3
Start page 565
End page 577
Total pages 13
Editor G. P. Szegoe
Place of publication Amsterdam, The Netherlands
Publisher Elsevier BV
Language eng
Subject C1
350301 Finance
710401 Finance and investment services
Abstract This paper examines execution costs and the impact of trade size for stock index futures using price-volume transaction data from the London International Financial Futures and Options Exchange. Consistent with Subrahmanyam [Rev. Financ. Stud. 4 (1991) 11] we find that effective half spreads in the stock index futures market are small compared to stock markets, and that trades in stock index futures have only a small permanent price impact. This result is important as it helps to better understand the success of equity index products such as index futures and Exchange Traded Funds. We also find that there is no asymmetry in the post-trade price reaction between purchases and sales for stock index futures across various trade sizes. This result is consistent with the conjecture in Chan and Lakonishok [J. Financ. Econ. 33 (1993) 173] that the asymmetry surrounding block trades in stock markets is due to the high cost of short selling and the general reluctance of traders to short sell on stock markets. (C) 2004 Elsevier B.V. All rights reserved.
Keyword Block trades
Futures exchange
Trading costs
Q-Index Code C1

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
2006 Higher Education Research Data Collection
UQ Business School Publications
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Citation counts: TR Web of Science Citation Count  Cited 21 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 24 times in Scopus Article | Citations
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Created: Wed, 15 Aug 2007, 13:30:31 EST