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New empirical evidence on the bid-ask spread

Version 2 2024-06-03, 14:57
Version 1 2018-03-13, 11:24
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posted on 2024-06-03, 14:57 authored by PK Narayan, Sagarika MishraSagarika Mishra, S Narayan
In this paper, we model the determinants of spread for 734 firms listed on the NYSE over the period 1 January 1998 to 31 December 2008. We propose a panel data model of the determinants of spread. There are four main messages emerging from our work. We find a statistically significant effect of volume on spread inconsistent with the work of Johnson (2000). On price, we find mixed results, consistent with the literature. On the effect of price volatility on spread, our results are completely the opposite of the cross-sectional literature but sides with the relatively recent work of Chordia et al. (2001). We allow for persistence of spread as a determinant of spread and find significant evidence of spread persistence across all 16 sectors. Finally, we examine size effects and find statistically strong evidence of size effects based on the relationship between price and spread, persistence and spread, and volatility and spread.

History

Pagination

1-43

Language

eng

Notes

School working paper (Deakin University. School of Accounting, Economics and Finance) ; 2015/06 In this paper, we model the determinants of spread for 734 firms listed on the NYSE over the period 1 January 1998 to 31 December 2008. We propose a panel data model of the determinants of spread. There are four main messages emerging from our work. We find a statistically significant effect of volume on spread inconsistent with the work of Johnson (2000). On price, we find mixed results, consistent with the literature. On the effect of price volatility on spread, our results are completely the opposite of the cross-sectional literature but sides with the relatively recent work of Chordia et al. (2001). We allow for persistence of spread as a determinant of spread and find significant evidence of spread persistence across all 16 sectors. Finally, we examine size effects and find statistically strong evidence of size effects based on the relationship between price and spread, persistence and spread, and volatility and spread.

Publication classification

CN.1 Other journal article

Copyright notice

2015, The Authors

Publisher

Deakin University, School of Accounting, Economics and Finance

Place of publication

Geelong, Vic.

Series

School Working Paper - Financial Econometrics Series ; SWP 2015/06

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