 On the different impacts of fixed versus floating bid-ask spreads on an automated intraday stock tradingAlexander Loginov and Malcolm Heywood The North American Journal of Economics and Finance, 2020, vol. 54, issue C Abstract: Trading or transaction costs are one of the most important attributes of any trading system and can be divided into two major groups: explicit (visible) and implicit (hidden). In this paper, we investigate the impact of the bid-ask spreads, a form of hidden cost, on the results of backtesting (and, therefore, the potential impact on real-time trading) of an automated trading system based on genetic programming. We concentrate on the nature (fixed or floating) of bid-ask spreads (hereafter ‘spread’) and demonstrate that the effectiveness of an automated trading system more significantly degrades in the case of floating spreads compared to fixed spreads. We investigate four fixed spreads (one, two, five and ten pips) and a floating spread with a median value of two pips and demonstrate that the floating spread with a mean value of 0.02 USD results in significantly worse performance than a fixed spread of 0.1 USD. ‘Floating spreads’ in this paper is a term used for market-determined continuously changing bid-ask spreads. Keywords: Stock; Hidden cost; NASDAQ; Bid-ask spread; Intraday; Genetic programming (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940820301443 DOI: 10.1016/j.najef.2020.101247 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.