Advanced Search
MyIDEAS: Login

An Extended Model of Serial Covariance Bid-Ask Spreads

Contents:

Author Info

  • Dar-Hsin Chen

    (Deparement of Banking and Finance, Tamkang University, Taiwan)

  • Lloyd P. Blenman

    (Department of Finance and Business Law, University of North Carolina-Charlotte,U.S.A.)

Registered author(s):

    Abstract

    This paper presents a generalized serial covariance spread pricing model that unifies and improves existing spread models. We analyze three cost components of spread: order processing, adverse information, and inventory holding costs. We modify Stoll's (1989) model by incorporating a two-period conditional probability trading model to derive a new spread estimator. We propose a methodology to estimate the input parameters. We then show this extended model potentially avoids some of the limitations associated with earlier models.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.ijbe.org/table%20of%20content/pdf/vol2-1/vol2-1-07.pdf
    Download Restriction: no
    File URL: http://www.ijbe.org/table%20of%20content/abstract/Vol.2/No.1/07.htm
    Download Restriction: no

    Bibliographic Info

    Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

    Volume (Year): 2 (2003)
    Issue (Month): 1 (April)
    Pages: 75-83

    as in new window
    Handle: RePEc:ijb:journl:v:2:y:2003:i:1:p:75-83

    Contact details of provider:
    Postal: 100 Wenhwa Road, Seatwen, Taichung
    Web page: http://www.ijbe.org/
    More information through EDIRC

    Related research

    Keywords: bid-ask spread; implicit spread; tick test;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Brooks, Raymond & Masson, Jean, 1996. "Performance of Stoll's Spread Component Estimator: Evidence from Simulations, Time-Series, and Cross-Sectional Data," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 19(4), pages 459-76, Winter.
    2. Choi, J. Y. & Salandro, Dan & Shastri, Kuldeep, 1988. "On the Estimation of Bid-Ask Spreads: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(02), pages 219-230, June.
    3. Aitken, Michael & Frino, Alex, 1996. "The accuracy of the tick test: Evidence from the Australian stock exchange," Journal of Banking & Finance, Elsevier, vol. 20(10), pages 1715-1729, December.
    4. Lee, Charles M C & Ready, Mark J, 1991. " Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-46, June.
    5. Stoll, Hans R, 1989. " Inferring the Components of the Bid-Ask Spread: Theory and Empirical Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 115-34, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ijb:journl:v:2:y:2003:i:1:p:75-83

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jui-Fen Lin).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.