Estimating the components of the bid/ask spread

Glosten, Lawrence R.; Harris, Lawrence

doi:10.1016/0304-405x(88)90034-7

Cited by 1,325 publications

(954 citation statements)

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“…We then develop a structural model that is used to estimate the adverse selection and order processing components of the spread in Xetra and Xetra BEST. For that purpose, we modify the Glosten and Harris (1988) approach to account for the specific dual market structure under scrutiny. We also estimate a restricted 11 version of the model which is similar to the models considered by Huang and Stoll (1997) and Madhavan, Richardson and Roomans (1997).…”

Section: Methodsology and Resultsmentioning

confidence: 99%

“…To this end we develop a structural model of the 2 The minimum price improvement has been reduced to 0.1 cent in 2007. 3 specific dual market structure of Xetra BEST. The model is an extension of the approach put forth in Glosten and Harris' (1988) seminal paper.…”

Section: Introductionmentioning

confidence: 99%

“…Third, the paper proposes a new methodology to estimate spread components in parallel markets. Our extension of the Glosten and Harris (1988) model has several potential applications, e.g. it could be used to analyze the competition between a regulated market and an electronic communication network…”

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confidence: 99%

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Is Best Really Better? Internalization of Orders in an Open Limit Order Book

Grammig

Theissen

2012

Schmalenbach Bus Rev

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Section: Methodsology and Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Is Best Really Better? Internalization of Orders in an Open Limit Order Book

Grammig

Theissen

2012

Schmalenbach Bus Rev

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“…More from the U.S. market context, Glosten and Harris (1988) reported an insignificant association between spreads and insider holdings using a sample of 250 NYSE stocks for the years 1981 to 1983. Additionally, Sarin et al (1996) used a sample of 786 listed U.S. stock for the years April-December 1985 and found that greater insider and Heflin and Shaw (2000) used a sample of 260 listed U.S. stocks in their study and found that firms having greater blockholder ownership also displayed larger quoted and effective spreads, a larger adverse selection spread, and smaller quoted depths.…”

Section: Ownership Structure and Stock Market Liquiditymentioning

confidence: 99%

Corporate Governance, Ownership Structure and Stock Market Liquidity in Saudi Arabia: A Conceptual Research Framework

Alsahlawi

Ammer

2017

AFR

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This paper aimed to provide a review of the literature concerning the effects of corporate governance and ownership structure on the devices of market microstructure. It provided a clear overview of empirical archival studies in literature regarding the way corporate governance and ownership structure mechanisms influence market liquidity, with focusing on the Saudi institutional setting. It aimed to pinpoint the differences and similarities in empirical outcomes of studies and determine the areas that call for further exploration. On the basis of the thorough review of literature and the theoretical basis, our study proposed a conceptual research framework. The framework is based on the premise that effective corporate governance can lead to enhanced disclosure quality, which in turn, lead to mitigating the information asymmetry and ultimately, enhanced market liquidity. Although theoretical studies argued the presence of the relationship between corporate governance, ownership and liquidity, we find that outcomes from empirical studies are still mixed. Majority of extant studies, with majority in the context of the U.S. firms, provide ambiguous results, making it challenging to reconcile the differences among them. Our paper provides important guidance for both new and experienced researchers, and it has implications for stock exchange authorities in terms of adopting effective regulatory policies and efficient trading systems to tackle information asymmetry.

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“…g Related models include Glosten and Harris (1988), Choi et al (1988), Stoll (1989), George et al (1991), Similarly, squaring both sides of Equation (8), we have:…”

Section: A Brief Introduction To the Ar Roll And Cs Estimatorsmentioning

confidence: 99%

New bid-ask spread estimators from daily high and low prices

Lambe

Adegbite

2018

International Review of Financial Analysis

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In this paper, we introduce two low frequency bid-ask spread estimators using daily high and low transaction prices. The range of mid-prices is an increasing function of the sampling interval, while the bid-ask spread and the relationship between trading direction and the mid-price are not constrained by it and are therefore independent. Monte Carlo simulations and data analysis from the equity and foreign exchange markets demonstrate that these models significantly out-perform the most widely used low-frequency estimators, such as those proposed in Corwin and Schultz (2012) and most recently in Abdi and Ranaldo (2017). We illustrate how our models can be applied to deduce historical market liquidity in NYSE, UK, Hong Kong and the Thai stock markets. Our estimator can also effectively act as a gauge for market volatility and as a measure of liquidity risk in asset pricing.

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Estimating the components of the bid/ask spread

Cited by 1,325 publications

References 22 publications

Is Best Really Better? Internalization of Orders in an Open Limit Order Book

Is Best Really Better? Internalization of Orders in an Open Limit Order Book

Corporate Governance, Ownership Structure and Stock Market Liquidity in Saudi Arabia: A Conceptual Research Framework

New bid-ask spread estimators from daily high and low prices

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