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Book Effects of Bid ask Spreads and Price Discreteness on Stock Returns

Download or read book Effects of Bid ask Spreads and Price Discreteness on Stock Returns written by Ajay R. Dravid and published by . This book was released on 1991 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Measurement Effects and the Variance of Returns after Stock Splits and Stock Dividends

Download or read book Measurement Effects and the Variance of Returns after Stock Splits and Stock Dividends written by Jennifer L. Koski and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relation between two institutional factors affecting stock price measurement, the bid-ask spread and price discreteness, and the increase in return variance after ex-dates of stock splits and stock dividends. Controlling for these measurement effects, the variance of daily returns still increases significantly after stock distributions. The variance of weekly returns also increases significantly, and the variance of returns for a control sample of nonsplitting firms shows no significant increase. Variance ratio tests show that bid-ask errors are small for NYSE stocks that split and therefore could not account for the large increase in variance. Price discreteness and the bid-ask spread do not explain increased variance after stock distributions.

Book The Effect of Decimalization on the Components of the Bid Ask Spread

Download or read book The Effect of Decimalization on the Components of the Bid Ask Spread written by Scott Gibson and published by . This book was released on 2002 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Previous empirical studies that decompose the bid-ask spread were done when securities traded in discrete price points equal to one-sixteenth or one-eighth of a dollar. These studies concluded that inventory and adverse-selection costs were economically insignificant compared to order-processing costs. Natural questions arise as to: (i) whether price discreteness allowed market makers to enjoy excess rents, thus reducing the significance of the inventory and adverse selection costs; (ii) whether discreteness decreased the traders' incentives to gather information; or (iii) whether methodologies previously employed mis-estimated the inventory and the adverse-selection costs. We show that the recent conversion to decimal pricing results in significantly tighter spreads. However, the dollar value of spreads attributed to adverse selection and inventory costs do not change significantly. Almost all of the reduction occurs in the order-processing component. As a result, inventory and adverse-selection costs now account for a significantly larger proportion of the traded spreads. A plausible explanation is that the minimum tick size constraint previously in place under fractional pricing allowed market makers to enjoy spreads that were larger than their actual costs.

Book An Ordered Probit Analysis of Transaction Stock Prices

Download or read book An Ordered Probit Analysis of Transaction Stock Prices written by Jerry A. Hausman and published by . This book was released on 1991 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate the conditional distribution of trade-to-trade price changes using ordered probit, a statistical model for discrete random variables. Such an approach takes into account the fact that transaction price changes occur in discrete increments, typically eighths of a dollar, and occur at irregularly spaced time intervals. Unlike existing continuous-time/discrete-state models of discrete transaction prices, ordered probit can capture the effects of other economic variables on price changes, such as volume, past price changes, and the time between trades. Using 1988 transactions data for over 100 randomly chosen U.S. stocks, we estimate the ordered probit model via maximum likelihood and use the parameter estimates to measure several transaction-related quantities, such as the price impact of trades of a given size, the tendency towards price reversals from one transaction to the next, and the empirical significance of price discreteness.

Book Essays on the BID ASK Spread

Download or read book Essays on the BID ASK Spread written by Tee Ngay Lim and published by . This book was released on 1987 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book

    Book Details:
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  • Release : 1981
  • ISBN :
  • Pages : 34 pages

Download or read book written by and published by . This book was released on 1981 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Modeling the Bid Ask Spread

Download or read book Modeling the Bid Ask Spread written by Nicolas P. B. Bollen and published by . This book was released on 2012 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: The need to understand and measure the determinants of market maker bid/ask spreads is crucial in evaluating the merits of competing market structures and the fairness of market maker rents. After providing a brief review of past work, this study develops a simple, parsimonious model for the market maker's spread that accounts for the effects of price discreteness induced by minimum tick size, order-processing costs, inventory-holding costs, adverse selection, and competition. The inventory-holding and adverse selection cost components of spread are modeled as an option with a stochastic time to expiration. This inventory-holding premium embedded in the spread represents compensation for the price risk borne by the market maker while the security is held in inventory. The premium is partitioned in such a way that the inventory holding and adverse selection cost components and the probability of an informed trade are identified. The model is tested empirically on a sample of NASDAQ stocks over three distinct tick size regimes and is shown to perform well.

Book Changes in Trading Activity Following Stock Splits and Their Impact on Volatility and the Adverse Information Component of the Bid ask Spread

Download or read book Changes in Trading Activity Following Stock Splits and Their Impact on Volatility and the Adverse Information Component of the Bid ask Spread written by A. S. Desai and published by . This book was released on 1996 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book An Analysis of the NYSE Listed Stocks Bid ask Spreads with Implications for the Turn of the year and Day of the week Anomalies in Common Stock Returns

Download or read book An Analysis of the NYSE Listed Stocks Bid ask Spreads with Implications for the Turn of the year and Day of the week Anomalies in Common Stock Returns written by Robert Alan Clark and published by . This book was released on 1989 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Bid Ask Spread Formula and Liquidity Cost

Download or read book Bid Ask Spread Formula and Liquidity Cost written by Sergei Esipov and published by . This book was released on 2010 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the fundamental properties of most markets is the existence of more than one asset price or distribution of prices for a given asset. In many markets this distribution is clearly bi-modal, and can be related to the so-called quot;bidquot; and quot;askquot; positions. The underlying detailed quot;microscopicquot; kinetics of bids, offers, and their matches can be complex and includes information flow along with capital and inventory balances. The reduction of a micro-model to the observed bid-ask spread determines the parameters of interest. We study a dynamic modification of the Garman model without inventory shortages, and obtain a relationship between the bid-ask spread, Value-at-Risk of the market maker, required returns, and the rate of arrivals of orders (measure of liquidity). Our formula for the bid-ask spread can be parametrized by historical data and used as a key ingredient in the information systems and/or automatic trading systems. The formula is derived in the risk-premium pricing framework suggested earlier by one of us and Guo. The bid-ask spread and liquidity costs are computed theoretically and compared with estimates for the most traded equity stocks. The remainder of the paper explores the benefits of dynamic bid-ask trading strategies.

Book Quarterly Journal of Business and Economics

Download or read book Quarterly Journal of Business and Economics written by and published by . This book was released on 1993 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Stock Splits and Stock Dividends

Download or read book Stock Splits and Stock Dividends written by wissem daadaa and published by . This book was released on 2016 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent theoretical researches in equity market consider that the enhanced liquidity is the principal motivation for stock splits and stock dividends, however, empirical studies find different results and even a decline in liquidity after the announcements or the effectives dates (ex dates) of theses events. In this paper, we analyze the stock splits and stock dividends effects on liquidity using bid ask spread measures. The sample is composed of all the stock splits and stock dividends announcements on Tunisia Stock Exchange (TSE), between 1990 and 2010. We test the change of the various indicators liquidity before the announcement period, between the announcement and the ex date, and after the ex date. The results show an increase in the absolute and relative spread after the ex date of stock splits. This increase in the spread involves an increase in the investor transaction cost, a degradation of the short-term liquidity and the fall of the market quality. This increase is explained by order processing costs and inventory holding costs.

Book Liquidity and Asset Prices

Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.

Book Liquidity  Markets and Trading in Action

Download or read book Liquidity Markets and Trading in Action written by Deniz Ozenbas and published by Springer Nature. This book was released on 2022 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.