We propose new methods for estimating the bid-ask spread from observed transaction prices alone. Our methods are based on the empirical characteristic function instead of the sample autocovariance function like the method of Roll (1984). As in Roll (1984), we have a closed form expression for the spread, but this is only based on a limited amount of the model-implied identification restrictions...

Discussion Papers are a series of manuscripts in their draft form. They are not intended for circulation or distribution except as indicated by the author. For that reason Discussion Papers may not be reproduced or distributed without the written consent of the author. * The authors are grateful to EBS for providing a proprietary data set for this academic purpose and to EBS analysts in New Yor...

In this paper an endogeneous model for the dynamics of the bid-ask spread is derived in the setting of equilibrium ...nancial markets as described by Platen and Rebolledo (1996). An intermediary is hereby added to the original model. The market of Platen and Rebolledo is split into two di¤erent markets: one in which the intermediary is the demand side facing the supply of economic agents, with ...

The market liquidity plays an authoritative role in the execution of financial transaction. Since has immediate impact on trading, risk been gaining a huge attention asset pricing, corporate financing, and portfolio management. bid-ask spread is often reported significant indicator its associated cost market. This work proposes new estimation spread, namely Informed Realized Spread (IRS). IRS m...

We model the behavior of Nasdaq momentum traders, also known as SOES bandits. We show, all things being equal, that the profitability of SOES bandits decreases in the bid-ask spread, but increases in the effective tick size. The patterns we observe in the data provide support for the model. We then discuss the plausibility of odd-eighth tick avoidance by market makers as a defense against SOES ...