Measuring Commodity Market Quality

In this paper, we identify the most suitable low-frequency proxies for analyzing commodity market quality. We use an 11-year sample of millisecond time-stamped order book data and examine the correlation of high-frequency liquidity and price efficiency measures with their low-frequency proxies measured with daily or 5-minute Time-and-Sales (TAS) data. We find that for liquidity, the volatility-over-volume measures are the best proxies for bid--ask spread and price impact. The correlation of price efficiency measures with their daily-frequency counterparts is low. Moderately correlated proxies can be achieved by using 5-minute data