However, when analyzing the 16 to 45 days window prior to contract expiration, it is possible to notice an increase in the bid ask spread
for the May 2016 contract (C K06).
Later on, Chung, et al., examines the influence of Earnings management on Bid ask spread
and concludes that the liquidity providers react to the aggressive accounting practices of earnings management and tend to widen their bid-ask spreads to protect themselves.
The BID ASK SPREAD
is calculated as (closing ask- closing bid) divided by closing midpoint.
Several papers have developed theoretical models that make predictions about the effect insider trading has on the bid ask spread
. Copeland and Galai (1988), Glosten and Milgrom (1985), and Kyle (1985) have all predicted a positive relationship between the prevalence of insider trading and the spreads that market makers set.
where [RB.sub.t] is the return calculated with the inferior limit of the bid ask spread
and [RD.sub.t] is the difference between the stock return and [RB.sub.t].
Approximately half of all December, 1995 and January, 1996 closes were reported to have occurred inside the closing bid ask spread
compared to approximately 40% of the December, 1996 and January, 1997 closes inside the spread.
Galai, 1983, "Informational Effects on the Bid Ask Spread
," Journal of Finance 38, 1457-1469.
Liquid securities have lower bid ask spreads
and volatility (daily standard deviation) is increasing in the level of liquidity.
"Actual experience with a public disclosure requirement suggests that it may have a negative impact on affected markets in terms of liquidity and bid ask spreads
," the association argued.
This time around, I think you will see the reverse; the bid ask spreads
will close to the upside.
1995, `Market structure and the intraday pattern of bid ask spreads
for NASDAQ securities', Journal of Business, vol.
The significance of the dummy variable in this preliminary exercise indicates that the Tiananmen Square conflict is associated with a significant structural break in the relationship between bid ask spreads
and country risk.