Test of market liquidity cost using intraday high frequency data: an empirical study of Chinese agricultural futures

This study quantifies differences in liquidity cost among Chinese agricultural futures using intraday high frequency tick-by-tick data. The joint impact of liquidity variables such as volume and expiration is also analyzed. Regression results suggest that the increased volume is associated with lower liquidity cost but the significances differ among futures contracts. Some outcomes support Samuelson Hypothesis in Chinese agricultural futures market, however, no clear evidence show positive relationship between rational liquidity range and lower liquidity costs or more reasonable liquidity situation. There appears to be higher transaction cost or other determinants independent of trade volume or expiration in certain contracts.