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.
| Language | English |
|---|---|
| Pages | 1767-1785 |
| Number of pages | 19 |
| Journal | Journal of Banking and Finance |
| Volume | 24 |
| Issue number | 11 |
| DOIs | |
| Publication status | Published - 30 Nov 2000 |
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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 journal › Article
TY - JOUR
T1 - The components of bid-ask spreads on the London Stock Exchange
AU - Menyah, Kojo
AU - Paudyal, Krishna
PY - 2000/11/30
Y1 - 2000/11/30
N2 - 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.
AB - 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.
KW - asymmetric information cost
KW - bid-ask spread
KW - D82
KW - G14
KW - inventory cost
KW - normal market size
KW - order-processing cost
UR - http://www.scopus.com/inward/record.url?scp=0041412803&partnerID=8YFLogxK
UR - https://www.sciencedirect.com/journal/journal-of-banking-and-finance
U2 - 10.1016/S0378-4266(99)00102-8
DO - 10.1016/S0378-4266(99)00102-8
M3 - Article
VL - 24
SP - 1767
EP - 1785
JO - Journal of Banking and Finance
T2 - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 11
ER -