This article examines whether USDA announcements and commodity index fund rolling
activity have an impact on liquidity costs, measured by the bid‐ask spread. Using Huang
and Stoll's (1997) model of liquidity costs, we estimate whether changes to liquidity costs are
driven by its adverse selection, inventory, or order processing components. Commodity
index fund roll activity reduces the asymmetric information cost component of liquidity cost
due to an increased proportion of noninformation‐based trading, but the inventory cost …

This article examines whether USDA announcements and commodity index fund rolling
activity have an impact on liquidity costs, measured by the bid-ask spread. Using Huang and
Stoll's (1997) model of liquidity costs, we estimate whether changes to liquidity costs are
driven by its adverse selection, inventory, or order processing components. Commodity
index fund roll activity reduces the asymmetric information cost component of liquidity cost
due to an increased proportion of noninformation-based trading, but the inventory cost …