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An Econometric Analysis for the Bid-Ask Spread in the Emerging Chilean Capital Market

Author

Listed:
  • David Cademartori-Rosso

    (Facultad de Ciencias Económicas y Administrativas Pontificia Universidad Católica de Valparaíso, Chile)

  • Berta Silva-Palavecinos

    (Facultad de Ciencias Económicas y Administrativas Pontificia Universidad Católica de Valparaíso, Chile)

  • Ricardo Campos-Espinoza

    (Facultad de Ciencias Económicas y Administrativas Pontificia Universidad Católica de Valparaíso, Chile)

  • Hanns de la Fuente-Mella

    (Facultad de Ciencias Económicas y Administrativas Pontificia Universidad Católica de Valparaíso, Chile)

Abstract

The purpose of this paper is to show that different methods for calculating the spread (Bid-Ask) and the methods for annualizing intra-day data affect the results of econometric models. To achieve our goal, we analyze different econometric models in the context of: i) the International Financial Reporting Standards (IFRS) adoption, ii) the reduction of information asymmetry due to new corporate governance standards, and iii) the ownership concentration that characterize the Chilean Capital Market. We test the quality of the information delivered to the market using two information disclosure indices (DIS and Botosan). We find that the definition of spread and the methods for annualizing intraday data it is a key decision and may affect the statistical significance of the variables of a specific model.

Suggested Citation

  • David Cademartori-Rosso & Berta Silva-Palavecinos & Ricardo Campos-Espinoza & Hanns de la Fuente-Mella, 2017. "An Econometric Analysis for the Bid-Ask Spread in the Emerging Chilean Capital Market," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(7), pages 90-101, May.
    • Handle: RePEc:sgm:jbfeuw:v:1:y:2017:i:7:p:90-101
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