A Comparison of Bid-Ask Spread Proxies: Evidence from Borsa Istanbul Futures

Journal of Economics, Finance and Accounting, Vol 3 (1), 244-254

Posted: 12 Apr 2021

See all articles by Zeynep Cobandag Guloglu

Zeynep Cobandag Guloglu

Istanbul Technical University

Cumhur Ekinci

Istanbul Technical University

Date Written: April 10, 2021

Abstract

We analyze the performance of five different methods appearing in the market microstructure literature in predicting effective and quoted bid-ask spreads (Roll, LOT Mixed, Effective Tick, High-Low and Closing Percent Quoted Spread proxies). With data from index futures, currency futures and gold futures traded in Borsa Istanbul and taking percent effective and percent quoted spreads obtained from intraday trade and quote data as benchmarks, we calculate and compare the correlations and root mean square errors of the spread measures. Results show that none of the proxies is successful enough in estimating effective or quoted spread although under normal market conditions, Effective Tick appears to perform best.

Keywords: bid-ask spread, Borsa Istanbul, futures market

JEL Classification: G10, G14, G23

Suggested Citation

Cobandag Guloglu, Zeynep and Ekinci, Cumhur, A Comparison of Bid-Ask Spread Proxies: Evidence from Borsa Istanbul Futures (April 10, 2021). Journal of Economics, Finance and Accounting, Vol 3 (1), 244-254, Available at SSRN: https://ssrn.com/abstract=3823761

Zeynep Cobandag Guloglu

Istanbul Technical University ( email )

Maçka
Istambul
Turkey

Cumhur Ekinci (Contact Author)

Istanbul Technical University ( email )

ITU Isletme Fakultesi - Macka
Istanbul, 34367
Turkey

HOME PAGE: http://akademi.itu.edu.tr/ekincicu/

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