A Simple Way to Estimate Bid-Ask Spreads from Daily High and Low Prices

@article{Corwin2012ASW,
  title={A Simple Way to Estimate Bid-Ask Spreads from Daily High and Low Prices},
  author={Shane A. Corwin and P. Schultz},
  journal={Journal of Finance},
  year={2012},
  volume={67},
  pages={719-760}
}
  • Shane A. Corwin, P. Schultz
  • Published 2012
  • Economics
  • Journal of Finance
  • We develop a bid-ask spread estimator from daily high and low prices. Daily high (low) prices are almost always buy (sell) trades. Hence, the high-low ratio reflects both the stock’s variance and its bid-ask spread. While the variance component of the high-low ratio is proportional to the return interval, the spread component is not. This allows us to derive a spread estimator as a function of high-low ratios over one-day and two-day intervals. The estimator is easy to calculate, can be applied… CONTINUE READING
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