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| Author: | Angelidis, T. Benos, A. |
| Title: | The components of the bid-ask spread: the case of the Athens Stock Exchange |
| Journal: | European Financial Management
2009 : JAN, VOL. 15:1, p. 112-144 |
| Index terms: | Greece models stock exchanges stocks prices asymmetric information transaction costs adverse selection |
| Freeterms: | bid-ask spread price impact |
| Language: | eng |
| Abstract: | This paper analyses the components of the bid-ask spread (henceforth as: b-a-s.) in the Athens Stock Exchange (ASE), Greece. Using the Madhavan (et al.) (1997) model, estimated is the adverse selection (here as: a-sel.) and the order handling component of the spreads and the probability of a trade continuation on the same side of either the bid or the ask price. It is extended by incorporating the traded volume. It is found that the a-sel. component exhibits U-shape patterns, whereas the cost component pattern depends on the stock price. For high priced stocks, the usual U-shape applies, while for low-priced ones, it is an increasing function of time, mainly due to the order handling spread component etc. Furthermore, by estimating the Madhavan et al. model for two distinct periods, it is explained why there are differences in the components of the b-a-s. |
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