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Estimation accuracy of high–low spread estimator

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  • Lin, Chien-Chih

Abstract

In this paper we analyze the estimation accuracy of high–low spread estimator. It is found that the performance of high–low spread estimator depends on the size of the true spread, the level of transaction frequency, and the degree of volatility. Analyzing the probability of measurement error, it is shown that the high–low spread estimators have better performance when the size of the spread is even wider, when the level of transaction frequency is even higher, or when the degree of volatility is relatively lower.

Suggested Citation

  • Lin, Chien-Chih, 2014. "Estimation accuracy of high–low spread estimator," Finance Research Letters, Elsevier, vol. 11(1), pages 54-62.
    • Handle: RePEc:eee:finlet:v:11:y:2014:i:1:p:54-62
    DOI: 10.1016/j.frl.2013.05.004
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    References listed on IDEAS

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    Cited by:

    1. Klova, Valeriia & Odegaard, Bernt Arne, 2018. "Equity trading costs have fallen less than commonly thought. Evidence using alternative trading cost estimators," UiS Working Papers in Economics and Finance 2018/4, University of Stavanger, revised 2019.
    2. Ripamonti, Alexandre, 2020. "Financial institutions, asymmetric information and capital structure adjustments," The Quarterly Review of Economics and Finance, Elsevier, vol. 77(C), pages 75-83.
    3. Ripamonti, Alexandre & Silva, Diego & Moreira Neto, Eurico, 2018. "Asset Pricing and Asymmetric Information," MPRA Paper 87403, University Library of Munich, Germany.
    4. Ripamonti, Alexandre, 2019. "Capital Structure Adjustments and Asymmetric Information," MPRA Paper 96936, University Library of Munich, Germany.

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    More about this item

    Keywords

    High–low spread estimator; Estimation accuracy; Effective spread; Measurement error;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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