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Corwin-Schultz bid-ask spread estimator in the Brazilian stock market

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  • Ripamonti, Alexandre

Abstract

This paper tests the validity of the Corwin-Schultz bid-ask spread estimator in the Brazilian stock market. The Corwin-Schultz estimator arises as an easy way to compute asymmetric information throughout daily high and low stock prices for estimating overnight and non-negative adjusted spreads. The sample consisted of Ibovespa firms from 1986 to 2014 and was analysed with time series econometrics. The findings show that the measures of spread have stationarity properties, allowing for forecasting in a period of lagged variables, besides having the property of time-varying cointegration with market-to-book ratio, debt on equity, size and return and also presenting sensibility to different periods, industries and listing segments. Thus, the Corwin-Schultz bid-ask spread estimator seems to be a valid and reliable measure for forecasting aggregate-data variables through the weighted average of firm-level variables.

Suggested Citation

  • Ripamonti, Alexandre, 2016. "Corwin-Schultz bid-ask spread estimator in the Brazilian stock market," MPRA Paper 79459, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79459
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    References listed on IDEAS

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    Cited by:

    1. Ripamonti, Alexandre, 2020. "Financial institutions, asymmetric information and capital structure adjustments," The Quarterly Review of Economics and Finance, Elsevier, vol. 77(C), pages 75-83.
    2. Ripamonti, Alexandre & Silva, Diego & Moreira Neto, Eurico, 2018. "Asset Pricing and Asymmetric Information," MPRA Paper 87403, University Library of Munich, Germany.
    3. Ripamonti, Alexandre, 2019. "Capital Structure Adjustments and Asymmetric Information," MPRA Paper 96936, University Library of Munich, Germany.
    4. Aritra Pan & Arun Kumar Misra & David McMillan, 2021. "A comprehensive study on bid-ask spread and its determinants in India," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1898735-189, January.
    5. Alexandre Ripamonti & Raphael Videira & Denis Ichimura, 2020. "Asymmetric information and daily stock prices in Brazil," Estudios Gerenciales, Universidad Icesi, vol. 36(157), pages 465-472, December.

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    More about this item

    Keywords

    Corwin-Schultz bid-ask spread estimator; asymmetric information; market microstructure; time varying cointegration;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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