Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities

Posted: 11 May 2000

See all articles by K.C. Chan

K.C. Chan

Hong Kong University of Science & Technology (HKUST) - Department of Finance

William G. Christie

Vanderbilt University - Finance; Vanderbilt University - Law School

Paul H. Schultz

University of Notre Dame - Department of Finance

Abstract

This paper examines the intraday pattern of bid-ask spreads among NASDAQ stocks. We find that spreads are relatively stable throughout the day, but narrow significantly near the close. This contrasts with the U-shaped pattern for NYSE stocks reported by Brock and Kleidon (1992) and McInish and Wood (1992). We attribute these divergent patterns to structural differences between specialist and dealer markets. The wider spreads for NYSE stocks near periods of market closure may reflect the market power of specialists. The decline in spreads near the close for NASDAQ stocks is consistent with inventory control by individual dealers.

JEL Classification: D40, G12, G20

Suggested Citation

Chan, Kakeung C. and Christie, Wiliam G. and Schultz, Paul H., Market Structure and the Intraday Pattern of Bid-Ask Spreads for NASDAQ Securities. JOURNAL OF BUSINESS, Vol 68 No 1, January 1995. Available at SSRN: https://ssrn.com/abstract=5633

Kakeung C. Chan

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong
852-2358 7669 (Phone)
852-2358 1749 (Fax)

Wiliam G. Christie (Contact Author)

Vanderbilt University - Finance ( email )

401 21st Avenue South
Owen Graduate School of Management
Nashville, TN 37203
United States
615-343-7802 (Phone)
615-343-7177 (Fax)

Vanderbilt University - Law School

131 21st Avenue South
Nashville, TN 37203-1181
United States

Paul H. Schultz

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States
219-631-3338 (Phone)
219-631-5255 (Fax)

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