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The Impact of Bid-Ask Prices on Market Anomalies

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  • Branch, Ben
  • Echevarria, David P

Abstract

A substantial body of literature on security market anomalies has evolved since the articulation of the efficient markets hypothesis. These anomalies include the size, January, and weekend effects. The evidence of such anomalies has been based upon returns computed from closing prices. Although readily available, analysis of closing prices may not reflect returns obtainable by public traders utilizing market orders to execute trade. We have demonstrated elsewhere that returns computed from closing prices are biased upward compared with returns that would have resulted from using market orders. This study reexamines the evidence on two market anomalies using returns generated in a manner more consistent with the actual returns available to actual market participants. Copyright 1991 by MIT Press.

Suggested Citation

  • Branch, Ben & Echevarria, David P, 1991. "The Impact of Bid-Ask Prices on Market Anomalies," The Financial Review, Eastern Finance Association, vol. 26(2), pages 249-268, May.
    • Handle: RePEc:bla:finrev:v:26:y:1991:i:2:p:249-68
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    Cited by:

    1. Kryzanowski, Lawrence & Zhang, Hao, 1995. "Introduction of dual-class shares: Further evidence on Canadian pro-rata distributions," International Review of Financial Analysis, Elsevier, vol. 4(1), pages 67-79.
    2. Branch, Ben & Echevarria, David P., 1998. "The bid-ask bias and the size effect: A test of the Blume-Stambaugh bid-ask bias effect hypothesis," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(1), pages 129-148.
    3. Chien-Liang Chiu & Paoyu Huang & Min-Yuh Day & Yensen Ni & Yuhsin Chen, 2024. "Mastery of “Monthly Effects”: Big Data Insights into Contrarian Strategies for DJI 30 and NDX 100 Stocks over a Two-Decade Period," Mathematics, MDPI, vol. 12(2), pages 1-22, January.

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