An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks

Abstract

The behavior of time‐weighted bid‐ask spreads over the trading day are examined. The plot of minute‐by‐minute spreads versus time of day has a crude reverse J‐shaped pattern. Schwartz identifies four determinants of spreads: activity, risk, information, and competition. Using a linear regression model, a significant relationship between these same factors and intraday spreads is demonstrated, but dummy variables for time of day have a reverse J‐shape. For given values of the activity, risk, information and competition measures, spreads are higher at the beginning and end of the day relative to the interior period. 1992 The American Finance Association

Publication Title

The Journal of Finance

Link to Full Text

Share

COinS