Is the SP500 Futures Market More Liquid than the VIX Futures Market?
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Price discovery is a blackbox in economic theory. The efficient market hypothesis, implied by the rational expectations paradigm, assumes that all relevant information is impounded into asset prices instantly and costlessly. Yet, that simplifying assumption implies an impossibility: it means that no agent in the economy has any incentive to undertake any effort to uncover information relevant to the price of a security. If one is interested in how information actually gets impounded into asset prices, one has to pay attention to how the mechanics of trading structures the process of price discovery. This is the principal explanandum of market microstructure theory.
Is the SP500 Futures Market More Liquid than the VIX Futures Market?
Is the SP500 Futures Market More Liquid than…
Is the SP500 Futures Market More Liquid than the VIX Futures Market?
Price discovery is a blackbox in economic theory. The efficient market hypothesis, implied by the rational expectations paradigm, assumes that all relevant information is impounded into asset prices instantly and costlessly. Yet, that simplifying assumption implies an impossibility: it means that no agent in the economy has any incentive to undertake any effort to uncover information relevant to the price of a security. If one is interested in how information actually gets impounded into asset prices, one has to pay attention to how the mechanics of trading structures the process of price discovery. This is the principal explanandum of market microstructure theory.