Corwin-Schultz bid-ask spread estimator in the Brazilian stock market

Alexandre Ripamonti

MPRA Paper from University Library of Munich, Germany

Abstract: This paper tests the validity of the Corwin-Schultz bid-ask spread estimator in the Brazilian stock market. The Corwin-Schultz estimator arises as an easy way to compute asymmetric information throughout daily high and low stock prices for estimating overnight and non-negative adjusted spreads. The sample consisted of Ibovespa firms from 1986 to 2014 and was analysed with time series econometrics. The findings show that the measures of spread have stationarity properties, allowing for forecasting in a period of lagged variables, besides having the property of time-varying cointegration with market-to-book ratio, debt on equity, size and return and also presenting sensibility to different periods, industries and listing segments. Thus, the Corwin-Schultz bid-ask spread estimator seems to be a valid and reliable measure for forecasting aggregate-data variables through the weighted average of firm-level variables.

Keywords: Corwin-Schultz bid-ask spread estimator; asymmetric information; market microstructure; time varying cointegration (search for similar items in EconPapers)
JEL-codes: G11 G17 G39 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in BAR Brazilian Administration Review 13.1(2016): pp. 76-97

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