Microstructure and high-frequency price discovery in the soybean complex

Xinquan Zhou; Guillaume Bagnarosa; Alexandre Gohin; Joost M.E. Pennings; Philippe Debie

doi:10.1016/j.jcomm.2023.100314

Microstructure and high-frequency price discovery in the soybean complex

Xinquan Zhou^*, Guillaume Bagnarosa, Alexandre Gohin, Joost M.E. Pennings, Philippe Debie

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We develop a theoretical framework and propose a relevant empirical analysis of the soybean-complex prices’ cointegration relationships in a high-frequency setting. We allow for heterogeneous expectations among traders on the multi-asset price dynamics and characterize the resulting market behaviour. We demonstrate that the asset prices’ autoregressive matrix rank and the speed of reversion towards the long-term equilibrium are related to the market realized and potential liquidity, unlike the cointegrating vector. Our empirical application to the soybean complex, where we control for volatility, supports our theoretical results when the price idleness of the different assets is properly accounted for. Our analysis further suggests that the presence of cointegration among assets is related to the time of day and the contract maturities traded at a given time.

Original language	English
Article number	100314
Number of pages	17
Journal	Journal of Commodity Markets
Volume	30
DOIs	https://doi.org/10.1016/j.jcomm.2023.100314
Publication status	Published - Jun 2023

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10.1016/j.jcomm.2023.100314Licence: CC BY

Cite this

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title = "Microstructure and high-frequency price discovery in the soybean complex",

abstract = "We develop a theoretical framework and propose a relevant empirical analysis of the soybean-complex prices{\textquoteright} cointegration relationships in a high-frequency setting. We allow for heterogeneous expectations among traders on the multi-asset price dynamics and characterize the resulting market behaviour. We demonstrate that the asset prices{\textquoteright} autoregressive matrix rank and the speed of reversion towards the long-term equilibrium are related to the market realized and potential liquidity, unlike the cointegrating vector. Our empirical application to the soybean complex, where we control for volatility, supports our theoretical results when the price idleness of the different assets is properly accounted for. Our analysis further suggests that the presence of cointegration among assets is related to the time of day and the contract maturities traded at a given time.",

author = "Xinquan Zhou and Guillaume Bagnarosa and Alexandre Gohin and Pennings, {Joost M.E.} and Philippe Debie",

note = "data source: CME Group",

year = "2023",

month = jun,

doi = "10.1016/j.jcomm.2023.100314",

language = "English",

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journal = "Journal of Commodity Markets",

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T1 - Microstructure and high-frequency price discovery in the soybean complex

AU - Zhou, Xinquan

AU - Bagnarosa, Guillaume

AU - Gohin, Alexandre

AU - Pennings, Joost M.E.

AU - Debie, Philippe

N1 - data source: CME Group

PY - 2023/6

Y1 - 2023/6

N2 - We develop a theoretical framework and propose a relevant empirical analysis of the soybean-complex prices’ cointegration relationships in a high-frequency setting. We allow for heterogeneous expectations among traders on the multi-asset price dynamics and characterize the resulting market behaviour. We demonstrate that the asset prices’ autoregressive matrix rank and the speed of reversion towards the long-term equilibrium are related to the market realized and potential liquidity, unlike the cointegrating vector. Our empirical application to the soybean complex, where we control for volatility, supports our theoretical results when the price idleness of the different assets is properly accounted for. Our analysis further suggests that the presence of cointegration among assets is related to the time of day and the contract maturities traded at a given time.

AB - We develop a theoretical framework and propose a relevant empirical analysis of the soybean-complex prices’ cointegration relationships in a high-frequency setting. We allow for heterogeneous expectations among traders on the multi-asset price dynamics and characterize the resulting market behaviour. We demonstrate that the asset prices’ autoregressive matrix rank and the speed of reversion towards the long-term equilibrium are related to the market realized and potential liquidity, unlike the cointegrating vector. Our empirical application to the soybean complex, where we control for volatility, supports our theoretical results when the price idleness of the different assets is properly accounted for. Our analysis further suggests that the presence of cointegration among assets is related to the time of day and the contract maturities traded at a given time.

U2 - 10.1016/j.jcomm.2023.100314

DO - 10.1016/j.jcomm.2023.100314

M3 - Article

SN - 2405-8513

VL - 30

JO - Journal of Commodity Markets

JF - Journal of Commodity Markets

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