Bid-Ask Spread, Volatility, and Volume in the Corporate Bond Market

Predicting future price volatility: Empirical evidence from an emerging limit order market

“…The higher the spread, the lower is the future price volatility. Hence, our results support the findings of Booth and Gurun (2008), Kalimipalli and Warga (2002), and Hasbrouck (1999). We also find that the average trade size, and not the number of trades, is the dominant determinant of the volume-volatility relationship which contradicts the findings of Jones et al (1994).…”

Volatility clustering and the bid–ask spread: Exchange rate behavior in early Renaissance Florence

“…Recent empirical studies supporting this positive relationship include Hasbrouck (1999), Bollerslev and Melvin (1994) and Kalimipalli and Warga (2002), who show that this phenomenon exists in common stocks, foreign exchange rates and corporate bonds, respectively. Hasbrouck (1999) reaches his conclusion using a GARCH setup, while the other two studies use a two-step ordered probit analysis in which spreads are classified into distinct probability categories and GARCH models are applied to returns to provide an estimate of expected volatility.…”

An Empirical Comparison of Credit Spreads between the Bond Market and the Credit Default Swap Market

“…This method is consistent with the so-called mixture of distributions hypothesis (MDH, see Kalimipalli and Warga, 2002), which considers new quotes as market responses to the arrival of new information. When there is no new information, there is no new quote.…”