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The Components Of Bid-Ask Spread For Bse Stocks

Author

Listed:
  • Bogdan Negrea

    (Academy of Economic Studies, Bucharest)

  • Lucian Ţâţu

    (Academy of Economic Studies, Bucharest)

Abstract

An important component of the transaction costs faced by investors in financial securities is the bid-ask spread set by market maker. The goal of this study is to determine the importance of the components of spread (order processing costs, inventory costs and adverse selection costs) using o model derived by Stoll (1989). Also, we examine the relationship between some stock characteristics (such as daily volume of trading and average stock price) and spread. The data set contains information about Bucharest Stock Exchange (BSE) first tier quoted stocks, for the period 27.11.2006- 19.12.2006.

Suggested Citation

  • Bogdan Negrea & Lucian Ţâţu, 2007. "The Components Of Bid-Ask Spread For Bse Stocks," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 11(11(516)(s), pages 27-32, November.
    • Handle: RePEc:agr:journl:v:11(516)(supplement)(vol2):y:2007:i:11(516)(supplement)(vol2):p:27-32
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