High-Frequency Price Discovery and Price Efficiency on Interest Rate Futures

This paper estimates a collection of high-frequency informational efficiency metrics by constructing a unique Eurodollar futures data set with the complete messaging history. To capture price efficiency, this paper calculates the mid-quote return autocorrelations following a full range of time intervals. The findings suggest the mid-quote return autocorrelations are positive and gradually increase from the tick-level to 30-min. Then, I utilize a vector autoregression to estimate the pricing error, which shows the adjustment time of trade returns is completed in 1 s. Furthermore, trade prices are less sensitive about incorporating any available new information as the Eurodollar futures approaches its maturity.