A Simple Estimation of Bid-Ask Spreads from Daily Close, High, and Low Prices
Journal
The Review of Financial Studies
ISSN
0893-9454
ISSN-Digital
1465-7368
Type
journal article
Date Issued
2017-12-01
Author(s)
Abstract
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.
including an accurate measurement of transaction cost, systematic liquidity risk, and commonality in liquidity for U.S. stocks dating back almost one century.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Oxford Univ. Press
Publisher place
New York, NY
Volume
30
Number
12
Start page
4437
End page
4480
Subject(s)
Eprints ID
252161