Perceptions of futures market liquidity: An empirical study of CBOT and CME traders

Julia W. Marsh, Joost M.E. Pennings, Philip Garcia

Research output: Chapter in Book/Report/Conference proceedingChapter


Traders' perceptions drive their market behavior, and can influence the dynamics of liquidity. This study surveyed 420 traders on their perceptions of the price path during an order imbalance to better understand the dynamics of liquidity. While most liquidity models assume a linear price path, only 12 percent of traders perceive such a path. This raises questions on the validity of such models. There is considerable heterogeneity in the perceptions of the price path. While trader characteristics are often used to classify traders, trader characteristics do not explain the heterogeneity in perceptions. In contrast, traders of a specific contract are associated with particular perceptions of the price path. This indicates that market microstructure may be the primary driver of traders' perceptions of the price path.

Original languageEnglish (US)
Title of host publicationDebt, Risk and Liquidity in Futures Markets
EditorsBarry Goss
Number of pages20
ISBN (Print)0203940156, 9780203940150
StatePublished - Sep 16 2007


  • Liquidity
  • Market depth
  • Market microstructure
  • Trader behavior/perceptions

ASJC Scopus subject areas

  • General Economics, Econometrics and Finance
  • General Business, Management and Accounting


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