A liquidity provider is required to enter bid-ask orders to permanently reduce the bid-ask spread
to 10 tick sizes or lower during the continuous session.
Another implicit cost with ETFs is the bid-ask spread
. The price at which an investor buys an ETF (the "ask") is generally higher than the price at which an investor could sell that ETF (the "bid").
We use the average daily bid-ask spread
of a firm's stock price (calculated from the Center for Research in Security Prices [CRSP]) as a measure of information asymmetry assuming that firms with greater information asymmetry will also have greater bid-ask spreads
The determination of the subscription price was based on the trade weighted average price of the share at Nasdaq OMX Helsinki in March 2017, and the price also fell within the bid-ask spread
at the close of trading yesterday.
Measures include size-adjusted cumulative abnormal returns (CARs), bid-ask spread
, analyst forecast revision and dispersion as proxies for market reaction.
The Seoul direct market is competitive in terms of spread, and getting more and more competitive in terms of brokerage fees: The bid-ask spread
, between 0.01 won and 0.03 won, is smaller than the arbitrage transaction spread, between 0.01 won and 0.04 won, and brokerage fees fell from 2,000 won per 1 million yuan before the opening of the market to around 740 won in 2016.
Transaction costs, also known as the bid-ask spread
, are the difference between the price market-makers pay the seller of a security and the price at which they sell the security to another buyer.
Therefore, for the present study, we directly treat bid-ask spread
as asymmetric information.