Bias in the effective bid-ask spread

• 成果类型: Article
• 署名作者: Hagstromer, Bjorn
• 署名单位: Stockholm University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.04.018
• 发表日期: 2021
• 页码: 314-337
• 关键词: Midpoint; Micro-price; Liquidity demand elasticity; illiquidity; Rule 605

摘要

The effective bid-ask spread measured relative to the spread midpoint overstates the true effective bid-ask spread in markets with discrete prices and elastic liquidity demand. The average bias is 13%-18% for S&P 500 stocks in general, depending on the estimator used as benchmark, and up to 97% for low-priced stocks. Cross-sectional bias variation across stocks, trading venues, and investor groups can influence research inference. The use of the midpoint also undermines liquidity timing and trading performance evaluations, and can lead non-sophisticated investors to overpay for liquidity. To overcome these problems, the paper proposes new estimators of the effective bid-ask spread. (c) 2021 The Author. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( http://creativecommons.org/licenses/by-nc-nd/4.0/ )