A Simple Way to Estimate to Bid-Ask Spreads from Daily Prices: A Case Study of Bangladesh

23 Pages Posted: 23 Feb 2012 Last revised: 13 Oct 2012

See all articles by Mohammed Ershad Hussain

Mohammed Ershad Hussain

Dillard University

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Date Written: January 3, 2011

Abstract

In the present paper we use the daily high and low prices of stocks to compute Corwin’s estimator of the bid-ask spread (in this case high-low spread also) for stocks traded in the Dhaka Stock Exchange (DSE). DSE is the primary stock exchange in Bangladesh. We use data for March 28th, 2010 to November 14th, 2010. We also estimate spread with Roll’s (1984) covariance based bid-ask spread and compare it with the high-low spread. Then we regress these measures of spread in DSE against three variables: daily no of stocks traded, volume, and value of stocks traded. In the last step of the study, we perform a test of efficiency of DSE based on Stoll’s (1989) approach. Evidence from this test shows that the DSE is not weak-form efficient.

Keywords: Dhaka Stock Exchange, High-Low Spread

Suggested Citation

Hussain, Mohammed Ershad and Hassan, M. Kabir, A Simple Way to Estimate to Bid-Ask Spreads from Daily Prices: A Case Study of Bangladesh (January 3, 2011). Available at SSRN: https://ssrn.com/abstract=2009461 or http://dx.doi.org/10.2139/ssrn.2009461

Mohammed Ershad Hussain (Contact Author)

Dillard University ( email )

2601 Gentilly Blvd
New Orleans, LA 70122
United States
5043440568 (Phone)

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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