IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Dynamics of Effective Quotes and Spreads Between Consecutive Trades - A Real-Time Structural Model of Price Formation

Listed author(s):
  • Liang Peng


    (Department of Finance)

This paper develops a real-time structural model of price formation, and uses it to investigate the dynamics of effective quotes and bid-ask spreads between consecutive trades. There is some evidence that the effective bid-ask spreads increase over time when no orders arrive. The effective quotes are found to change over time when no orders arrive. The dynamics of bid and ask are different and are related to the direction of previous transaction. Market makers act as though they believe that clustering trades with middle-range duration (coming one or two minutes after the last trades) are more likely to contain private information, while reversing trades with same duration are less likely to contain private information. Some stylized facts are also established regarding the average duration and frequency for clustering trades, reversing trades,upticks, and downticks.

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:
Download Restriction: no

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm179.

in new window

Date of creation: 07 Apr 2001
Handle: RePEc:ysm:somwrk:ysm179
Contact details of provider: Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

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

When requesting a correction, please mention this item's handle: RePEc:ysm:somwrk:ysm179. See general information about how to correct material in RePEc.

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

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.