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A simple approximation of intraday spreads using daily data

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  • Chung, Kee H.
  • Zhang, Hao

Abstract

This study examines the relation between the bid-ask spread from the daily CRSP data and the bid-ask spread from the intraday TAQ data. We show that the CRSP-based spread is highly correlated with the TAQ-based spread across stocks using data from 1993 through 2009. The simple CRSP-based spread provides a better approximation of the TAQ-based spread than all other low-frequency liquidity measures in cross-sectional settings. However, the CRSP-based spread is highly correlated with the TAQ spread in time-series settings only for NASDAQ stocks. Overall, our results suggest that the simple CRSP-based spread could be used in lieu of the TAQ-based spread in academic research that focuses on cross-sectional analysis.

Suggested Citation

  • Chung, Kee H. & Zhang, Hao, 2014. "A simple approximation of intraday spreads using daily data," Journal of Financial Markets, Elsevier, vol. 17(C), pages 94-120.
    • Handle: RePEc:eee:finmar:v:17:y:2014:i:c:p:94-120
    DOI: 10.1016/j.finmar.2013.02.004
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    More about this item

    Keywords

    Bid-ask spreads; TAQ; CRSP; Market liquidity; Information asymmetry; Low-frequency liquidity measures;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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