Open Journal of Social Sciences
Volume 1, Issue 7 (December 2013)
ISSN Print: 2327-5952 ISSN Online: 2327-5960
Google-based Impact Factor: 0.73 Citations
An Econometric Analysis for the Behavior of the Bid-Ask Spread ()
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ABSTRACT
Information asymmetries are an important element in the functioning of capital markets. An indirect means of measuring information asymmetry is through the spread of stock prices. The purpose of this paper is to identify the explanatory variables and the determinants of the bid-ask spread and to quantify the influence that the actors involved in the brokering of publically offered securities may have over the spread. The methodology used to model the time series for each of the analyzed companies is based on a time series from each of the observed econometric multivariate processes. The analysis shows a significantly negative relationship between the spread and the market-maker size, calculated in terms of both the equity and the stock portfolio; likewise, activity is measured by observing the amount offered for purchase and/or sale.
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