Title: The influence of information asymmetry on market liquidity: evidence in the Brazilian futures market

Authors: João Eduardo Ribeiro; Antonio Artur de Souza; Cleiton Martins Duarte da Silva; Eduardo Amat Silva

Addresses: Faculty of Economic Sciences, Federal University of Minas Gerais, Avenida Presidente Antônio Carlos, 6627 – Room 4012, Pampulha – Belo Horizonte – Minas Gerais, 31270-901, Brazil ' Faculty of Economic Sciences, Federal University of Minas Gerais, Brazil ' Faculty of Economic Sciences, Federal University of Minas Gerais, Brazil ' Faculty of Economic Sciences, Federal University of Minas Gerais, Brazil

Abstract: The purpose of this article is to analyse the effect of information asymmetry risk on the liquidity of agricultural commodity futures contracts traded on the Brazilian Stock Exchange. For this purpose, commodities with the possibility of physical and/or financial settlement and trading throughout the year were chosen as a sample: Arabica coffee, live cattle, soybean and corn. The analysis was performed using a panel data model, in which the spread was adopted as a proxy for market liquidity and the volume-synchronised probability of informed trading as a proxy for the probability of information asymmetry in the negotiations. The results showed that the variables considered are able to explain 43.08% of the spread variation. Finally, a positive relationship was identified between information asymmetry and market liquidity, which differs from the results found in the literature.

Keywords: market liquidity; information asymmetry; agricultural commodities; volume-synchronised probability of informed trading; VPIN; spread; Brazilian Stock Exchange; futures market.

DOI: 10.1504/IJCA.2023.138033

International Journal of Critical Accounting, 2023 Vol.13 No.4, pp.331 - 343

Received: 21 Jun 2022
Accepted: 20 Sep 2023
Published online: 17 Apr 2024 *

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