Asset storability and the informational content of inter-temporal prices uri icon

abstract

  • Given two markets for the same asset, profit-maximizing information traders will trade in that market with the lower transaction costs. Storage costs are a major factor in cash market transaction costs. The greater the disparity in the asset's cost of storage between its two markets, the greater the informational disparity between the asset's cash and futures price. A test developed to measure the informational impact of an asset's futures price on its cash price confirms the theoretical expectation. Furthermore, no evidence is found that an asset's futures market introduces noise into its cash market's pricing process. 1995.

published proceedings

  • Journal of Empirical Finance

author list (cited authors)

  • Covey, T., & Bessler, D. A.

citation count

  • 15

complete list of authors

  • Covey, Ted||Bessler, David A

publication date

  • June 1995