TITLE:
An Econometric Analysis for the Behavior of the Bid-Ask Spread
AUTHORS:
H. de la Fuente-Mella, R. Campos-Espinoza, B. Silva-Palavecinos, D. Cademartori-Rosso
KEYWORDS:
Information Asymmetries; Econometric Modeling; Market Makers
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.1 No.7,
December
12,
2013
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.