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The Dynamics of Discrete Bid and Ask Quotes Author info | Abstract | Publisher info | Download info | Related research | Statistics Joel Hasbrouck (Stern School of Business, New York University)
This paper presents an empirical microstructure model of bid and ask quotes that features discreteness, random costs of market making, and ARCH volatility effects. Applied to intraday quotes at 15-minute intervals for Alcoa (a randomly chosen Dow stock), the results show that quote exposure costs contain stochastic components that are persistent and large relative to the deterministic intraday "U" components. Analysis of the filtered estimates of the system suggest that bid and ask costs contain common components, and that these costs reflect risk as proxied by ARCH variance forecasts. Copyright The American Finance Association 1999.
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Article provided by American Finance Association in its journal The Journal of Finance .
Volume (Year): 54 (1999)
Issue (Month): 6 (December)
Pages: 2109-2142
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Handle: RePEc:bla:jfinan:v:54:y:1999:i:6:p:2109-2142Contact details of provider: Web page: http://www.afajof.org/ More information through EDIRC
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