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Alternative Estimators for the Effective Spread Derived from High-Frequency Data

In: Effective Investments on Capital Markets

Author

Listed:
  • Joanna Olbryś

    (Bialystok University of Technology)

  • Michał Mursztyn

    (Bialystok University of Technology)

Abstract

According to the literature, various proxies for the effective bid/ask spread are utilized by researchers. They can be estimated from low- or high-frequency data. In this study, three alternative estimators for the effective spread derived from high-frequency data are investigated. We analyse the basic version of percentage effective spread and two modified versions of the Roll’s estimator for the effective spread. Data set contains intraday data rounded to the nearest second for 86 Warsaw Stock Exchange (WSE) traded companies, in the period from January 2005 to December 2016. We test distributional properties, linear and nonlinear dependences, as well as stationarity of the analysed daily time series. Moreover, the research hypothesis concerning the statistical significance of correlations between daily values of various effective spread estimates is tested. Furthermore, the study provides robustness analyses of the obtained results with respect to the whole sample and three consecutive subsamples, covering the pre-crisis, crisis and post-crisis periods. The empirical findings confirm significant relationships between alternative proxies for the effective spread and turn out to be robust to the choice of the period.

Suggested Citation

  • Joanna Olbryś & Michał Mursztyn, 2019. "Alternative Estimators for the Effective Spread Derived from High-Frequency Data," Springer Proceedings in Business and Economics, in: Waldemar Tarczyński & Kesra Nermend (ed.), Effective Investments on Capital Markets, chapter 0, pages 177-188, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-21274-2_13
    DOI: 10.1007/978-3-030-21274-2_13
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    Cited by:

    1. Joanna Olbryś & Elżbieta Majewska, 2020. "Assessing Commonality in Liquidity with Principal Component Analysis: The Case of the Warsaw Stock Exchange," JRFM, MDPI, vol. 13(12), pages 1-13, December.

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