Efficient estimation of bid-ask spreads from open, high, low, and close prices

• 成果类型: Article
• 署名作者: Ardia, David; Guidotti, Emanuele; Kroencke, Tim A.
• 署名单位: Universite de Montreal; HEC Montreal; Universite de Montreal; HEC Montreal; Universita della Svizzera Italiana
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103916
• 发表日期: 2024
• 关键词: BID-ASK SPREAD; Trading frictions; transaction costs

摘要

Popular bid-ask spread estimators are downward biased when trading is infrequent. Moreover, they consider only a subset of open, high, low, and close prices and neglect potentially useful information to improve the spread estimate. By accounting for discretely observed prices, this paper derives asymptotically unbiased estimators of the effective bid-ask spread. Moreover, we combine them optimally to minimize the estimation variance and obtain an efficient estimator. Through theoretical analyses, numerical simulations, and empirical evaluations, we show that our efficient estimator dominates other estimators from transaction prices, yields novel insights for measuring bid-ask spreads, and has broad applicability in empirical finance.