Abstract
This study examines the relation between the bid-ask spread from the daily CRSP data and the bid-ask spread from the intraday TAQ data. We show that the CRSP-based spread is highly correlated with the TAQ-based spread across stocks using data from 1993 through 2009. The simple CRSP-based spread provides a better approximation of the TAQ-based spread than all other low-frequency liquidity measures in cross-sectional settings. However, the CRSP-based spread is highly correlated with the TAQ spread in time-series settings only for NASDAQ stocks. Overall, our results suggest that the simple CRSP-based spread could be used in lieu of the TAQ-based spread in academic research that focuses on cross-sectional analysis.
| Original language | English |
|---|---|
| Pages (from-to) | 94-120 |
| Number of pages | 27 |
| Journal | Journal of Financial Markets |
| Volume | 17 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jan 2014 |
Keywords
- Bid-ask spreads
- CRSP
- Information asymmetry
- Low-frequency liquidity measures
- Market liquidity
- TAQ
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