Efficiency and volatility of spot and futures agricultural markets: Impact of trade frequencies

Efficience et volatilité des marchés agricoles spot et à termes: L'impact de la fréquence des transactions

David Batista Soares (1, 2) , Alain Bretto (3) , Joël Priolon (1)

1 ECO-PUB - Economie Publique
2 GREYC - Groupe de Recherche en Informatique, Image et Instrumentation de Caen
3 Equipe CODAG - Laboratoire GREYC - UMR6072

In efficient markets, asset prices are equal to their fundamentals. This classical view is considered valid for agricultural commodities' spot and futures markets. However, fragmentation of orders impacts price dynamics, leading to modification in spot and futures' trade frequency, relative trade frequency, and quantities exchanged. To highlight public policies on the impacts of fragmentation of orders, it is necessary to improve the understanding of its theoretical consequences. Based on a sequential trading framework, our main result showed that unbiased prices and a minimal volatility of fundamental basis are achieved not with optimal trade frequencies but with an optimal relative trade frequency.

Mots clés: commodities; spot and futures prices; market efficiency; volatility; stock and fragmentation

Domaines: Économie et finance quantitative [q-fin]

David Batista Soares, Alain Bretto, Joël Priolon. Efficiency and volatility of spot and futures agricultural markets: Impact of trade frequencies. 2019. ⟨hal-02364549⟩