The Intraday Behavior of Bid-Ask Spreads for NYSE Stocks and Cboe Options

JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS, September 1995

Posted: 25 Aug 1998

See all articles by Kalok Chan

Kalok Chan

CUHK Business School

Y. Peter Chung

University of California at Riverside

Herb Johnson

University of California, Riverside (UCR) - Department of Finance and Management Science

Abstract

We study the intraday behavior of bid-ask spreads for actively traded CBOE options and for their NYSE-traded underlying stocks. We confirm previous findings that stocks have a U-shaped spread pattern; however, the options display a very different intraday pattern--one that declines sharply after the open, and then levels off. Our results suggest that both the degree of competition in market making and the extent of informed trading are important for understanding the intraday behavior of spreads.

JEL Classification: G13

Suggested Citation

Chan, Kalok and Chung, Y. Peter and Johnson, Herbert E., The Intraday Behavior of Bid-Ask Spreads for NYSE Stocks and Cboe Options. JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS, September 1995. Available at SSRN: https://ssrn.com/abstract=6619

Kalok Chan (Contact Author)

CUHK Business School ( email )

Hong Kong
852 3943 9988 (Phone)

Y. Peter Chung

University of California at Riverside ( email )

900 University Avenue
Riverside, CA 92521
United States
909-787-3906 (Phone)
909-787-2933 (Fax)

Herbert E. Johnson

University of California, Riverside (UCR) - Department of Finance and Management Science ( email )

900 University Avenue
Riverside, CA 92521
United States
909-787-2932 (Phone)
909-787-2933 (Fax)

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