Efficient estimation of bid–ask spreads from open, high, low, and close prices
Author (Corporation)
Publication date
2024
Typ of student thesis
Course of study
Collections
Type
01A - Journal article
Editors
Editor (Corporation)
Supervisor
Parent work
Journal of Financial Economics
Special issue
DOI of the original publication
Link
Series
Series number
Volume
161
Issue / Number
Pages / Duration
103916
Patent number
Publisher / Publishing institution
Elsevier
Place of publication / Event location
Edition
Version
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Abstract
Popular bid–ask spread estimators are downward biased when trading is infrequent. Moreover, they consider only a subset of open, high, low, and close prices and neglect potentially useful information to improve the spread estimate. By accounting for discretely observed prices, this paper derives asymptotically unbiased estimators of the effective bid–ask spread. Moreover, we combine them optimally to minimize the estimation variance and obtain an efficient estimator. Through theoretical analyses, numerical simulations, and empirical evaluations, we show that our efficient estimator dominates other estimators from transaction prices, yields novel insights for measuring bid–ask spreads, and has broad applicability in empirical finance.
Keywords
Subject (DDC)
330 - Wirtschaft
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ISBN
ISSN
0304-405X
Language
English
Created during FHNW affiliation
Yes
Strategic action fields FHNW
Publication status
Published
Review
Peer review of the complete publication
Open access category
Hybrid
License
Citation
ARDIA, David, Emanuele GUIDOTTI und Tim KRÖNCKE, 2024. Efficient estimation of bid–ask spreads from open, high, low, and close prices. Journal of Financial Economics. 2024. Bd. 161, S. 103916. DOI 10.1016/j.jfineco.2024.103916. Verfügbar unter: https://doi.org/10.26041/fhnw-11087