Determinants of bid and ask quotes and implications for the cost of trading

Journal of Empirical Finance

Volumn 15, Issue 4, 2008, Pages 656-678

  Zhang, Michael Yuanjie ^a   Russell, Jeffrey R ^b   Tsay, Ruey S ^b  

^a AXA Rosenberg Group   (United States)

^b UNIVERSITY OF CHICAGO   (United States)

Author keywords

Liquidity; Market microstructure; Price dynamics; Trading costs

Indexed keywords

EID: 46149098084     PISSN: 09275398     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jempfin.2007.12.003     Document Type: Article

References (45)

1. Admati A.R., and Peiderer P. A theory of intraday patterns: volume and price variability. Review of Financial Studies 1 (1988) 3-40
2. Amihud Y., and Mendelson H. Dealership markets: market making with uncertainty. Journal of Financial Economics 8 (1980) 31-54
3. Andersen T.G. Return volatility and trading volume: an information of interpretation of stochastic volatility. Journal of Finance 51 1 (1996) 169-204
4. Ball C.A. Estimation bias introduced by discrete security prices. Journal of Finance 43 (1988) 841-865
5. Ball C.A., and Chordia T. True spreads and equilibrium prices. Journal of Finance 56 (2001) 1801-1835
6. Brock W.A., and Kleidon A.W. Periodic market closure and trading volume. Journal of Economic Dynamics and Control 16 (1992) 451-489
7. Campbell J.Y., Grossman S.J., and Wang J. Trading volume and serial correlation in stock returns. Quarterly Journal of Economics 108 (1993) 905-934
8. Chan K., and Fong W.M. Trade size, order imbalance, and the volatility-volume relation. Journal of Financial Economics 57 (2000) 247-273
9. Easley D., and O'Hara M. Time and the process of security price adjustment. Journal of Finance 47 (1992) 577-606
10. Epps T.W., and Epps M.L. The stochastic dependence of security price changes and transaction volumes: implications for the mixture-of-distribution hypothesis. Econometrica 44 2 (1976) 305-321
11. Foster F.D., and Viswanathan S. A theory of interday variations in volumes, variances, and trading costs in securities markets. Review of Financial Studies 3 4 (1990) 593-624
12. Gallant A.R., Rossi P.E., and Tauchen G. Stock prices and volume. Review of Financial Studies 5 (1992) 199-242
13. Gilks W.R., Best N.G., and Tan K.K.C. Adaptive rejection Metropolis sampling within Gibbs sampling. Applied Statistics 44 (1995) 155-173
14. Glosten L.R., and Milgrom P.R. Bid, ask and transaction prices in a specialist market with heterogeneously informed traders. Journal of Financial Economics 14 (1985) 71-100
15. Goodhart C.A.E., and O'Hara M. High frequency data in financial markets: issues and applications. Journal of Empirical Finance 4 (1997) 73-114
16. Gottlieb G., and Kalay A. Implications of the discreteness of observed stock prices. Journal of Finance 40 (1985) 135-153
17. Harris L.E. Estimation of stock price variance and serial covariances from discrete observations. Journal of Financial and Quantitative Analysis 25 3 (1990) 291-306
18. Harris M., and Raviv A. Difference of opinion make a horse race. Review of Financial Studies 6 (1993) 473-506
19. Hasbrouck J. Trades, quotes, inventories and information. Journal of Financial Economics 22 (1988) 229-252
20. Hasbrouck J. Measuring the information content of stock trades. Journal of Finance 46 1 (1991) 179-207
21. Hasbrouck J. The dynamics of discrete bid and ask quotes. Journal of Finance 54 6 (1999) 2109-2142
22. Hasbrouck J. Security bid/ask dynamics with discreteness and clustering: simple strategies for modeling and estimation. Journal of Financial Markets 2 (1999) 1-28
23. Hasbrouck J., and Sofianos G. The trades of market makers: an empirical analysis of NYSE specialists. Journal of Finance 48 (1993) 1565-1593
24. Hastings W.K. Monte-Carlo sampling methods using Markov chain and their applications. Biometrika 57 (1970) 97-109
25. Ho T.S.Y., and Stoll H.R. The dynamics of dealer markets under competition. Journal of Finance 38 (1983) 1053-1074
26. Jacquier E., Polson N.G., and Rossi P.E. Bayesian analysis of stochastic volatility models (with discussion). Journal of Business and Economic Statistics 12 (1994) 371-417
27. Jain P.C., and Joh G.H. The dependence between hourly prices and trading volume. Journal of Financial and Quantitative Analysis 23 (1988) 269-283
28. Kim S., Shephard N., and Chib S. Stochastic volatility: likelihood inference and comparison with ARCH models. Review of Economic Studies 65 (1998) 361-393
29. Kitagawa G. Non-Gaussian state-space modeling of nonstationary time series. Journal of American Statistical Association 82 (1987) 1032-1041
30. Kyle A. Continuous time auctions and insider trading. Econometrica 53 (1985) 1315-1336
31. Lamoureux C.G., and Lastrapes W.D. Heteroskedasticity in stock return data: volume versus GARCH effects. Journal of Finance 45 1 (1990) 221-229
32. Lee C.M., Mucklow B., and Ready M.J. Spreads, depths and the impact of earnings information: an intraday analysis. Review of Financial Studies 6 2 (1993) 345-374
33. Lee C.M., and Ready M.J. Inferring trade direction from intraday data. Journal of Finance 46 6 (1991) 733-746
34. Madhavan A., and Smidt S. An analysis of changes in specialist inventories and quotations. Journal of Finance 48 (1993) 1595-1628
35. Manrique A., and Shephard N. Likelihood analysis of a discrete bid/ask price model for a common stock. Working Paper (1997), Nuffield College, Oxford University
36. Manrique A., and Shephard N. Simulation-based likelihood inference for limited dependent processes. Econometrics Journal 1 (1998) C174-C202
37. McInish T.H., and Wood R.A. An analysis of intraday patterns in bid/ask spreads for NYSE stocks. Journal of Finance 47 (1992) 753-764
38. Metropolis N., Rosenbluth A., Rosenbluth M., Teller A., and Teller E. Equations of state calculations by fast computing machines. Journal of Chemical Physics 21 (1953) 1087-1092
39. Nelson D.B. Conditional heteroskedasticity in asset returns: a new approach. Econometrica 59 (1991) 347-370
40. O'Hara M. Market Microstructure Theory (1995), Basil Blackwell
41. O'Hara M., and Oldfield G.S. The microeconomics of market making. Journal of Financial and Quantitative Analysis 21 (1986) 361-376
42. Ritter C., and Tanner M.A. Facilitating the Gibbs sampler: the Gibbs stopper and the Griddy-Gibbs sampler. Journal of American Statistical Association 87 (1992) 861-868
43. Stoll H.R., and Whaley R.E. Stock market structure and volatility. Review of Financial Studies 3 (1990) 37-71
44. Tauchen G.E., and Pitts M. The price variability-volume relationship on speculative markets. Econometrica 51 2 (1983) 485-505
45. Tierney L. Markov chains for exploring posterior distributions (with discussion). Annals of Statistics 22 (1994) 1701-1762