Journal
AGRICULTURAL ECONOMICS
Volume 50, Issue 1, Pages 113-126Publisher
WILEY
DOI: 10.1111/agec.12470
Keywords
Agricultural commodities; Bid-ask spreads; Spread decomposition
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Funding
- Faculty of Business, Economics and Law, Auckland University of Technology [RP2017-03]
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We examine the role of information asymmetry on changes in bid-ask spreads during major United States Department of Agriculture (USDA) announcements. Our analyses, using corn, wheat, and soybean futures, indicate that information asymmetry is significantly higher on USDA announcement days compared to nonannouncement days. We further observe that the increased information asymmetry prior to news announcements is mainly driven by the divergence in private information possessed by market participants. However, once the USDA news is released, not only the dispersion in investors' private information but also the surprises in news announcements contribute to increased information asymmetry and widening of bid-ask spreads.
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