The components of bid-ask spreads on the London Stock Exchange

Kojo Menyah, Krishna Paudyal

Research output: Contribution to journalArticle

27 Citations (Scopus)

Abstract

The objective of this paper is to estimate the cost components of the bid-ask spread on the London Stock Exchange using intraday data. The findings are unambiguous in isolating the three cost components of quoted spreads. They are, therefore, consistent with the earlier work of Stoll based on the quote driven Nasdaq market (Stoll, H., 1989. Journal of Finance 44, 753-776). Additionally, the three spread components vary with the liquidity of the stocks measured by the minimum number of shares market makers are obliged to trade.

LanguageEnglish
Pages1767-1785
Number of pages19
JournalJournal of Banking and Finance
Volume24
Issue number11
DOIs
Publication statusPublished - 30 Nov 2000

Fingerprint

Bid/ask spread
London Stock Exchange
Costs
Intraday data
Nasdaq
Finance
Liquidity
Market makers

Keywords

  • asymmetric information cost
  • bid-ask spread
  • D82
  • G14
  • inventory cost
  • normal market size
  • order-processing cost

Cite this

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The components of bid-ask spreads on the London Stock Exchange. / Menyah, Kojo; Paudyal, Krishna.

In: Journal of Banking and Finance, Vol. 24, No. 11, 30.11.2000, p. 1767-1785.

Research output: Contribution to journalArticle

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