A simple approximation of intraday spreads using daily data

Kee H. Chung and Hao Zhang

Journal of Financial Markets, 2014, vol. 17, issue C, 94-120

Abstract: This study examines the relation between the bid-ask spread from the daily CRSP data and the bid-ask spread from the intraday TAQ data. We show that the CRSP-based spread is highly correlated with the TAQ-based spread across stocks using data from 1993 through 2009. The simple CRSP-based spread provides a better approximation of the TAQ-based spread than all other low-frequency liquidity measures in cross-sectional settings. However, the CRSP-based spread is highly correlated with the TAQ spread in time-series settings only for NASDAQ stocks. Overall, our results suggest that the simple CRSP-based spread could be used in lieu of the TAQ-based spread in academic research that focuses on cross-sectional analysis.

Keywords: Bid-ask spreads; TAQ; CRSP; Market liquidity; Information asymmetry; Low-frequency liquidity measures (search for similar items in EconPapers)
JEL-codes: G12 G20 G30 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (141)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:17:y:2014:i:c:p:94-120

DOI: 10.1016/j.finmar.2013.02.004

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