Spread determinants and the day-of-the-week effect |
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Authors: | Paresh Kumar Narayan Sagarika Mishra Seema Narayan |
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Institution: | 1. Centre for Financial Econometrics, Deakin University, Australia;2. RMIT University, Australia |
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Abstract: | In this paper, we examine the determinants of the dollar bid–ask spread for each day of the week over the period 1998–2008. Using a panel cointegration approach, we estimate the determinants of the spread in both the short-run and long-run. Our main findings suggest that: (1) there are day-of-the-week effects for certain groups of firms; (2) the panel error correction model also reveals day-of-the-week effects, and the speed of adjustment to equilibrium following a shock is faster on Fridays; and (3) the effects of volume and volatility on the spread are mixed, with only some sectors experiencing the day-of-the-week effect. |
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Keywords: | Bid-ask spread Day-of-the-week Panel Error Correction Sectors |
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