Bid-Ask Spread Patterns and the Optimal Timing for Discretionary Liquidity Traders on Xetra

Martin Angerer (), Georg Peter, Sebastian Stoeckl, Thomas Wachter, Matthias Bank and Marco Menichetti
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Martin Angerer: University of Liechtenstein
Georg Peter: University of Liechtenstein
Sebastian Stoeckl: University of Liechtenstein
Thomas Wachter: LGT Bank Bendern
Matthias Bank: University of Innsbruck
Marco Menichetti: University of Liechtenstein
Authors registered in the RePEc Author Service: Sebastian Stöckl

Schmalenbach Business Review, 2018, vol. 70, issue 3, No 1, 209-230

Abstract: Abstract This paper explores the statistical and economical significance of intra-day and -week patterns in bid-ask spreads. We investigate a large panel of high frequency data for stocks traded on the XETRA trading platform and observe significant patterns in spreads. In addition to showing the robustness of our findings over time, as well as in cross-section, we are also able to demonstrate the patterns’ predictability in an out-of-sample approach. Our findings have clear implications, especially for uninformed but discretionary liquidity traders, which allow significant and economically relevant reductions of transaction costs.

Keywords: Intra-day; Bid-ask spread; Liquidity; Timing; Discretionary trader (search for similar items in EconPapers)
JEL-codes: G10 G14 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s41464-018-0049-z

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