Estimation of the bid/ask spread on Danish stocks, an evaluation of Roll's estimator

Ken Nyholm

Applied Financial Economics, 1997, vol. 7, issue 6, 605-610

Abstract: This paper presents the first empirical study of the bid/ask spread based on intra-daily transactions data from the Danish stock market. The technique developed by Roll (1984) for inferring the bid/ask spread is implemented and evaluated on samples of data from January, February and March 1993. In particular, since quoted spreads are available, it is possible to make a direct evaluation of the Roll estimator. The conclusion of the paper is twofold. First, the Roll estimator captures a large part of the actual quoted spread. Secondly, the average Danish bid/ask spread is larger than the 0.3% presented by Roll for the US market.

Date: 1997
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DOI: 10.1080/758533852

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