Trading volume and contract rollover in futures contracts |
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| Affiliation: | 1. Finance Department, Auckland University of Technology, 55 Wellesley Street East, Auckland, New Zealand;2. Dhillon School of Business, University of Lethbridge, 4401 University Drive Lethbridge, AB, Canada T1K 3M4;3. Finance and Legal Studies Department, University of Missouri - St Louis, 1 University Blvd. 202 Anheuser-Busch Hall St. Louis, MO 63121, United States |
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| Abstract: | Futures trading volume data display strong quarterly seasonality due to the ‘rolling over’ of positions close to the expiry date of the near contract. This undermines the use of volume as a proxy for information arrival. By making explicit the relationship between trading volume and change in open interest, we provide an upper bound for this rollover. Empirical analysis of the S&P500, the UK Long Gilts and the Brent Crude contracts shows that our upper bound can be used to remove expiry-related seasonality from trading volume data. |
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