On the Estimation of Bid-Ask Spreads: Theory and Evidence
This paper extends the Roll model for implicit bid-ask spreads by incorporating the possibility of serial correlation in transaction type. The validity of this formula is examined using intra-day transactions and bid-ask spread data for options traded on the Chicago Board Options Exchange. The resul...
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| Veröffentlicht in: | Journal of financial and quantitative analysis 1988-06, Vol.23 (2), p.219-230 |
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| container_title | Journal of financial and quantitative analysis |
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| creator | Choi, J. Y. Salandro, Dan Shastri, Kuldeep |
| description | This paper extends the Roll model for implicit bid-ask spreads by incorporating the possibility of serial correlation in transaction type. The validity of this formula is examined using intra-day transactions and bid-ask spread data for options traded on the Chicago Board Options Exchange. The results indicate that the model derived here closely estimates the effective bid-ask spread in that it explains more than 80 percent of the crosssectional differences in announced bid-ask spreads. |
| doi_str_mv | 10.2307/2330882 |
| format | Article |
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The results indicate that the model derived here closely estimates the effective bid-ask spread in that it explains more than 80 percent of the crosssectional differences in announced bid-ask spreads.</description><subject>Analytical estimating</subject><subject>Asked price</subject><subject>Bid price</subject><subject>Conditional probabilities</subject><subject>Correlations</subject><subject>Covariance</subject><subject>Estimators</subject><subject>Financial transactions</subject><subject>Market prices</subject><subject>Mathematical analysis</subject><subject>Mathematical models</subject><subject>Maximum likelihood estimation</subject><subject>Price changes</subject><subject>Quantitative analysis</subject><subject>Regression analysis</subject><subject>Serial</subject><subject>Spread</subject><subject>Studies</subject><issn>0022-1090</issn><issn>1756-6916</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>1988</creationdate><recordtype>article</recordtype><sourceid>BENPR</sourceid><recordid>eNp90MtKAzEUBuAgCtYqvkIQQVxEc-nk4q4tvQiFUqzrkE4SO62d1GQq9u2dMkXBhasDh4__XAC4JviBMiweKWNYSnoCWkRkHHFF-CloYUwpIljhc3CR0grjQwO3gJqWsFo6OEhVsTFVEUoYPOwVFnXTGr5sozM2PcH50oW4h6a0cPBZWFfm7hKcefOe3NWxtsHrcDDvj9FkOnrudycoZ5JWyHdsJqgS1HnLlVWYZ1Jlsm5RrIzzzBrpuCHMm0WmPMs7knDheO495bmgrA1umtxtDB87lyq9CrtY1iM1JURKQqiq0V2D8hhSis7rbazviXtNsD68RR_fUsvbRq5SFeI_DDWsSJX7-mEmrjUXTGSaj2ZaDccd3BvPNKv9_XEBs1nEwr653zX_Zn8Ddo54jQ</recordid><startdate>19880601</startdate><enddate>19880601</enddate><creator>Choi, J. 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Y. ; Salandro, Dan ; Shastri, Kuldeep</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c382t-f4d572972efd69d90658958729209aef3da8e6a13fab59f3c48167e6cff26c723</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>1988</creationdate><topic>Analytical estimating</topic><topic>Asked price</topic><topic>Bid price</topic><topic>Conditional probabilities</topic><topic>Correlations</topic><topic>Covariance</topic><topic>Estimators</topic><topic>Financial transactions</topic><topic>Market prices</topic><topic>Mathematical analysis</topic><topic>Mathematical models</topic><topic>Maximum likelihood estimation</topic><topic>Price changes</topic><topic>Quantitative analysis</topic><topic>Regression analysis</topic><topic>Serial</topic><topic>Spread</topic><topic>Studies</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Choi, J. 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Y.</au><au>Salandro, Dan</au><au>Shastri, Kuldeep</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>On the Estimation of Bid-Ask Spreads: Theory and Evidence</atitle><jtitle>Journal of financial and quantitative analysis</jtitle><addtitle>J. Financ. Quant. Anal</addtitle><date>1988-06-01</date><risdate>1988</risdate><volume>23</volume><issue>2</issue><spage>219</spage><epage>230</epage><pages>219-230</pages><issn>0022-1090</issn><eissn>1756-6916</eissn><coden>JFQAAC</coden><abstract>This paper extends the Roll model for implicit bid-ask spreads by incorporating the possibility of serial correlation in transaction type. The validity of this formula is examined using intra-day transactions and bid-ask spread data for options traded on the Chicago Board Options Exchange. The results indicate that the model derived here closely estimates the effective bid-ask spread in that it explains more than 80 percent of the crosssectional differences in announced bid-ask spreads.</abstract><cop>New York, USA</cop><pub>Cambridge University Press</pub><doi>10.2307/2330882</doi><tpages>12</tpages></addata></record> |
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| identifier | ISSN: 0022-1090 |
| ispartof | Journal of financial and quantitative analysis, 1988-06, Vol.23 (2), p.219-230 |
| issn | 0022-1090 1756-6916 |
| language | eng |
| recordid | cdi_proquest_journals_211881129 |
| source | Jstor Complete Legacy; Cambridge University Press Journals Complete; EBSCOhost Business Source Complete |
| subjects | Analytical estimating Asked price Bid price Conditional probabilities Correlations Covariance Estimators Financial transactions Market prices Mathematical analysis Mathematical models Maximum likelihood estimation Price changes Quantitative analysis Regression analysis Serial Spread Studies |
| title | On the Estimation of Bid-Ask Spreads: Theory and Evidence |
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