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Cross-market Liquidity: Intraday Dynamics and Spillover Effect

Student: Anastasia Basarabets

Supervisor: Victoria Rodina

Faculty: Faculty of Economic Sciences

Educational Programme: Economics (Bachelor)

Year of Graduation: 2020

This paper addresses the issue of liquidity in Russian futures market and seeks to elucidate the interdependence between futures and stock markets from liquidity point of view. The research aims to derive intraday futures liquidity patterns and distinguish the liquidity spillover effect to equity market. Methods are based on tests for proved liquidity measures performance during the day and econometric analysis of relation between futures trading and equity market by application of DCC-GARCH model on daily data for Russian Blue Chip Index companies with equity futures from 2009 to 2020. Intraday analysis was built on minute trade data for closest contracts in March 2020. Empirical results demonstrated certain liquidity patterns as ones derived in literature for futures markets. However, only partial coincide was found for futures liquidity intraday behavior with respect to the equity market. A positive spillover effect between these markets was revealed which evidences greater information transparency of single stock futures. An opposite effect was distinguished for certain pairs of assets. The results contribute to the literature on liquidity and its transmission and, furthermore, are relevant to all market participants, especially while deciding on investment distribution and hedging strategies.

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