Corwin-Schultz bid-ask spread estimator in the Brazilian stock market

Ripamonti, Alexandre (2016): Corwin-Schultz bid-ask spread estimator in the Brazilian stock market. Published in: BAR Brazilian Administration Review , Vol. 1, No. 13 (March 2016): pp. 76-97.

Abstract

This paper tests the validity of the Corwin-Schultz bid-ask spread estimator in the Brazilian stock market. The Corwin-Schultz estimator arises as an easy way to compute asymmetric information throughout daily high and low stock prices for estimating overnight and non-negative adjusted spreads. The sample consisted of Ibovespa firms from 1986 to 2014 and was analysed with time series econometrics. The findings show that the measures of spread have stationarity properties, allowing for forecasting in a period of lagged variables, besides having the property of time-varying cointegration with market-to-book ratio, debt on equity, size and return and also presenting sensibility to different periods, industries and listing segments. Thus, the Corwin-Schultz bid-ask spread estimator seems to be a valid and reliable measure for forecasting aggregate-data variables through the weighted average of firm-level variables.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corwin-Schultz bid-ask spread estimator; asymmetric information; market microstructure; time varying cointegration
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation; G - Financial Economics > G3 - Corporate Finance and Governance > G39 - Other

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