The bid-ask spread can be decomposed into two parts-one part due to asymmetric informat ion and the other part due to other factors such as monopoly power. T he part due to asymmetric information attenuates statistical biases i n mean return, variance, and serial covariance. Thus, using spread da ta to adjust for biases in return moments requires knowing not only t he spread but the composition of the spread. Furthermore, any spread estimation procedure using transaction prices must estimate two sprea d components. Copyright 1987 by American Finance Association.
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Article provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 42 (1987) Issue (Month): 5 (December) Pages: 1293-1307 Download reference. The following formats are available: HTML,
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