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The Use of Financial Ratios as Measures of Risk in the Determination of the Bid-Ask Spread in Tehran Stock Exchange

Author

Listed:
  • Sasan Mehrani

    (Associate professor of Tehran University, Tehran, Iran)

  • Amir Rasaiian

    (M.S.c of accounting of Mazandaran University, Babolsar, Iran)

  • Sara Hanjari

    (M.S.c of Economics)

Abstract

Many recent studies accounts for the relationship between market risk measures and accounting risk measures. There is also a relationship between risk and bid-ask spread. Therefore some researchers have studied the relationship between financial information as measures of risk and bid-ask spread. The main goal of this paper is to review the relationship between financial information and bid-ask spread in Tehran Stock Exchange. Therefore 156 firms that their necessary information for a three years period was available are selected. Then information about 14 independent variables has been studied. Bid-Ask spread is also computed as dependent variable. Multivariate fixed effects panel data regression technique is used to examine the hypotheses. Signification of the models is examined by t and F statistics. The conclusions account for that the model measures more than twenty eight percent changes in Bid-Ask spread.

Suggested Citation

  • Sasan Mehrani & Amir Rasaiian & Sara Hanjari, 2011. "The Use of Financial Ratios as Measures of Risk in the Determination of the Bid-Ask Spread in Tehran Stock Exchange," Iranian Economic Review, Economics faculty of Tehran university, vol. 16(2), pages 11-25, spring.
  • Handle: RePEc:eut:journl:v:16:y:2011:i:2:p:11
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    References listed on IDEAS

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    1. Atkins, Allen B & Dyl, Edward A, 1997. " Transactions Costs and Holding Periods for Common Stocks," Journal of Finance, American Finance Association, vol. 52(1), pages 309-325, March.
    2. Desgranges, Gabriel & Foucault, Thierry, 2005. "Reputation-based pricing and price improvements," Journal of Economics and Business, Elsevier, vol. 57(6), pages 493-527.
    3. Ascioglu, Asli & Hegde, Shantaram P. & McDermott, John B., 2005. "Auditor compensation, disclosure quality, and market liquidity: Evidence from the stock market," Journal of Accounting and Public Policy, Elsevier, vol. 24(4), pages 325-354.
    4. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
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