Bid-Ask Spread and its Components Estimation for BSE stocks Using Models Based on Autocovariance

Lucian Tatu and Delia Tatu
Additional contact information
Delia Tatu: Academy of Economic Studies, Bucharest, Romania

No 1125, International Trade and Finance Association Conference Papers from International Trade and Finance Association

Abstract: An important component of the transaction costs faced by investors in financial securities is the bid-ask spread set by market maker. The goal of this study is to determine the importance of the components of spread (order processing costs, inventory costs and adverse selection costs) using models based on autocovariance derived by Roll(1984), George, Kaul and Nimalendran (1991) and Stoll (1989). Also, we examine the relationship between some stock characteristics (such as daily volume of trading and average stock price) and spread. The data set contains information about Bucharest Stock Exchange (BSE) first tier quoted stocks, for the period 27.11.2006- 19.12.2006.This paper was presented at the 18th International Conference of the International Trade and Finance Association, meeting at Universidade Nova de Lisboa, Lisbon, Portugal on May 23, 2008Keywords: bid-ask spread, inventory cost, adverse selection cost, order cost

Date: 2008-08-13
New Economics Papers: this item is included in nep-fmk and nep-mst
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bep:itfapp:1125

Access Statistics for this paper

More papers in International Trade and Finance Association Conference Papers from International Trade and Finance Association
Bibliographic data for series maintained by Christopher F. Baum ().