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New empirical evidence on the bid-ask spread

journal contribution
posted on 2024-11-01, 22:40 authored by Paresh Narayan, Sagarika Mishra, Seema Wati Narayan
In this article, 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 (2008). 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

Journal

Applied Economics

Volume

47

Issue

42

Start page

4484

End page

4500

Total pages

17

Publisher

Routledge

Place published

United Kingdom

Language

English

Copyright

© 2015 Taylor & Francis

Former Identifier

2006054449

Esploro creation date

2020-06-22

Fedora creation date

2015-10-07

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