Download or read book Estimation of the Bid ask Spread and Its Components written by Thomas John George and published by . This book was released on 1991 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Estimation of Bid Ask Spread and Its Components in Indian Stock Market Using Trade Prices written by Priyanka Singh and published by . This book was released on 2013 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the absence of order-book data and limited information on quoted bid-ask spreads in the Indian stock market, this paper attempts to analyze the bid-ask spread in Indian market by estimating bid-ask spreads and its components from trade prices. The sample consists of tick-by-tick data for the time period January 2002 through to October 2008 of 160 stocks traded on the National Stock Exchange of India. We estimate implied bid-ask spreads and its components (adverse selection costs; combined inventory and order processing costs) using theoretical models. We find that all the models used in the study produce consistent estimates of bid-ask spreads and its components. In the Indian Stock Market, we find that the adverse selection cost and the combined order-processing and inventory-holding cost each account for approximately 50 percent of the bid-ask spread. We also find that the estimated bid-ask spreads are approximately 80 percent of the quoted bid-ask spreads. In our sample period, we find that the relative bid-ask spreads have decreased over the years.

Download or read book Determinants of the Components of Bid Ask Spreads on Stocks written by Sung-Hun Kim and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we show that George, Kaul and Nimalendran's (GKN) estimators of the adverse selection and order processing cost components of the bid-ask spread are biased due to intertemporal variations in the bid-ask spread. We provide new estimators that correct this bias and that are applicable to individual securities, and estimate these cost components empirically using data on NYSE/AMEX stocks. As expected, our results indicate that on average adverse selection costs account for approximately 50 percent of the bid-ask spread, sharply higher than the estimates of 8-10 percent obtained by GKN for NASDAQ stocks and 21 percent that we obtain for NYSE/AMEX stocks using GKN's estimators. We then conduct cross-sectional regressions designed primarily to determine whether adverse selection costs vary across specialists after controlling for firm size and other factors. Consistent with previously-established hypotheses, we find that adverse-selection costs vary across specialists, and that this variation is related to the number of securities that the specialist handles.

Download or read book Derivatives and Hedge Funds written by Stephen Satchell and published by Springer. This book was released on 2016-05-18 with total page 416 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the last 20 years hedge funds and derivatives have fluctuated in reputational terms; they have been blamed for the global financial crisis and been praised for the provision of liquidity in troubled times. Both topics are rather under-researched due to a combination of data and secrecy issues. This book is a collection of papers celebrating 20 years of the Journal of Derivatives and Hedge Funds (JDHF). The 18 papers included in this volume represent a small sample of influential papers included during the life of the Journal, representing industry-orientated research in these areas. With a Preface from co-editor of the journal Stephen Satchell, the first part of the collection focuses on hedge funds and the second on markets, prices and products.

Download or read book The Bid Ask Spread s Cost Components written by Steven V. Mann and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop and test a model that provides improved estimates of the bid-ask spread's cost components: order processing, adverse selection, and inventory control. The model incorporates three unique features: (1) a dealer's response to inventory imbalances is not static but depends on the size of the imbalance and the dealer's aversion to inventory risk; (2) active inventory management by a dealer will result in a stationary stochastic process for inventory; and (3) inventory management will influence the adverse selection cost component. We estimate the spread's components using intraday data for NYSE/AMEX and NASDAQ stocks. We also examine the impact of our model's features on the cost estimates. The results suggest inventory costs are higher and order processing costs are lower than previously reported.

Download or read book A Simple Way to Estimate Bid Ask Spreads from Daily High and Low Prices written by Shane A. Corwin and published by . This book was released on 2011 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a bid-ask spread estimator from daily high and low prices. Daily high (low) prices are almost always buy (sell) trades. Hence, the high-low ratio reflects both the stock's variance and its bid-ask spread. While the variance component of the high-low ratio is proportional to the return interval, the spread component is not. This allows us to derive a spread estimator as a function of high-low ratios over one-day and two-day intervals. The estimator is easy to calculate, can be applied in a variety of research areas, and generally outperforms other low-frequency estimators.

Download or read book A Model of the Components of the Bid ask spread written by Alexey Sergeevich Serednyakov and published by . This book was released on 2006 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Simple Estimation of Bid Ask Spreads from Daily Close High and Low Prices written by Farshid Abdi and published by . This book was released on 2017 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a new method to estimate the bid-ask spread when quote data are not available. Compared to other low-frequency estimates, this method utilizes a wider information set, namely, readily available close, high, and low prices. In the absence of end-of-day quote data, this method generally provides the highest cross-sectional and average time-series correlations with the TAQ effective spread benchmark. Moreover, it delivers the most accurate estimates for less liquid stocks. Our estimator has many potential applications, including an accurate measurement of transaction cost, systematic liquidity risk, and commonality in liquidity for U.S. stocks dating back almost one century. The appendix to "A Simple Estimation of Bid-Ask Spreads from Daily Close, High, and Low Prices" to is available at the following URL: 'http://ssrn.com/abstract=2809692' http://ssrn.com/abstract=2809692.

Download or read book The Components of the Bid Ask Spread written by Timotheos Angelidis and published by . This book was released on 2005 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the components of the bid-ask spread in the Athens Stock Exchange (ASE), which was recently characterized as a developed market. For 18 large and 13 medium capitalization stocks, we estimate the adverse selection and the order handling component of the spreads as well as the probability of a trade continuation on the same side of either the bid or the ask price, using the Madhavan et al. (1997) model. We extend it by incorporating the traded volume and we find that the adverse selection component exhibits U-shape patterns, while the cost component pattern depends on the stock price. For high priced stocks, the usual U-shape applies, while for low-priced ones, it is an increasing function of time, mainly due to the different magnitude of the order handling spread component. Our analysis shows that the order handling component dominates inventory effects, particularly in the first and last half hour of the trading day and hence we observe economies of scale in trading. Furthermore, the expected price change is higher in the low capitalization stocks, while the most liquid stocks are the high priced ones. Moreover, by estimating the Madhavan et al. (1997) model for two distinct periods we explain why there are differences in the components of the bid-ask spread.

Download or read book Three Essays on the Cost Components of the Bid ask Spread written by Paul Leventhal and published by . This book was released on 1999 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three interrelated essays. The first essay focuses on the adverse selection component of the bid-ask spread. A regime switching model applied to the trading process leads to a parsimonious model of the time-series evolution of the bid-ask spread in which market participants use trade data to answer the following question: Is there currently private information in the market for a given stock? If there is a high probability of private information in the market, this leads contemporaneously to a greater revision in beliefs about the true price. Together with compensation for transactions costs, this leads to a greater revision in transaction price. Using TSE 35 trade and quote data for March and May 1996, the pooled cross-section and time series results support this view. The second essay examines the costs of adverse information and order processing in light of transaction size, type of trader and type of trading method. Specifically, it is found that adverse selection increases with the trade size (consistent with numerous empirical studies relating trade size and the cost components of the bid-ask spread). However, whether the trade was undertaken by the designated market maker, by a principal trader or by an individual belonging to neither of these two categories is also of importance. In addition, we show that trades consummated within the investment dealer's firm have a lower adverse information cost component than trades executed externally. For order processing, it is found that the single most important determinant of cost is whether the transaction is internal or external to the investment dealer firm, with internal trades being more costly. The third essay examines the robustness of the Huang and Stoll (1997) model estimates to the use of different clustering methods and to a minimum quotation increment reduction (MQIR) on the Toronto Stock Exchange. We find that adequate reversal of trade flow is a necessary but not sufficient condition for model performance. We also find that model estimates are quite sensitive to the data clustering method selected. In addition, we show that this model fails to provide adequate cost component estimates of the spread in the post-MQIR period due to a fundamental change in market-maker behavior.

Download or read book Bid Ask Spread Components in an Order Driven Environment written by Paul Brockman and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this study is to extend the bid-ask spread decomposition literature into the order-driven environment. The use of electronic limit order books combined with order-driven market making has been increasing rapidly in recent years because of improvements in information technology and financial market deregulation. To date, reported bid-ask spread decompositions rely almost exclusively on quote-driven or hybrid systems. This study provides bid-ask spread component estimates from one of the world's largest order-driven markets, the Stock Exchange of Hong Kong. Based on a sample of over six million observations, we estimate a median adverse selection component of 33 percent and a median order processing component of 45 percent of the spread. Dollar volume-based decile portfolios show significant cross-sectional variation for adverse selection costs but insignificant variation for order processing costs. Finally, order persistence is consistently positive for all deciles and displays a direct relation with the level of trading activity.

Download or read book On the Estimation of Bid ask Spreads and Their Implications for Stock Volatility and Return Distributions written by Jong-yeon Choi and published by . This book was released on 1987 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Components of the Bid ask Spread in a Limit order Market written by and published by . This book was released on 2003 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stock Market Structure Volatility and Volume written by Hans R. Stoll and published by . This book was released on 1990 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Specialists Limit Order Traders and the Components of the Bid Ask Spread written by Kee H. Chung and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study compares the components of the bid-ask spread estimated from quotes that reflect the trading interest of specialists with those estimated from limit-order quotes and all available quotes for a sample of NYSE stocks. The results show that the adverse selection component of the spread estimated from specialist quotes is significantly smaller than the corresponding figures from limit-order quotes and entire quotes. We interpret this as evidence that New York Stock Exchange specialists transfer at least a part of adverse selection costs to outsiders through the discretionary use of limit orders. Our results show that the estimation/interpretation of the components of the spread using quote data that include both specialist and limit-order interests is problematic.

Download or read book An Intraday Analysis of the Determinants of the Components of the Bid ask Spread written by Bonnie G. Fancher and published by . This book was released on 1995 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Empirical Analysis of Liquidity written by Craig Holden and published by Now Publishers. This book was released on 2014-11-28 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a synthesis of the empirical evidence on market liquidity. The liquidity measurement literature has established standard measures of liquidity that apply to broad categories of market microstructure data. Specialized measures of liquidity have been developed to deal with data limitations in specific markets, to provide proxies from daily data, and to assess institutional trading programs. The general liquidity literature has established local cross-sectional patterns, global cross-sectional patterns, and time-series patterns.