Language

Multilingual content from IBKR

Close Navigation
Learn more about IBKR accounts
Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices

Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices

Posted March 23, 2022 at 10:28 am
Emanuele Guidotti
GME

The paper “Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices” is available via SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3892335

Paper Title:
Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices

Authors:
David Ardia, HEC Montreal – Department of Decision Sciences
Emanuele Guidotti, University of Neuchâtel – Institute of Financial Analysis
Tim Alexander Kroencke, University of Neuchâtel – Institute of Financial Analysis

Date:
Written: July 23, 2021
Last revised: March 7, 2022

Abstract:

This paper formally derives an efficient estimator of the bid-ask spread from open, high, low, and close prices. The estimator is asymptotically unbiased and optimally combines the full set of price data to minimize the estimation variance. In absence of quote data, it delivers the most accurate estimates of bid-ask spreads theoretically, numerically, and empirically. The estimator is easy to calculate and has a broad applicability in empirical finance.

Ardia, David and Guidotti, Emanuele and Kroencke, Tim Alexander, Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices (July 23, 2021). Available at SSRN: https://ssrn.com/abstract=3892335 or http://dx.doi.org/10.2139/ssrn.3892335

CRAN Package:
The estimator proposed in this paper (EDGE) is implemented in R and it is available at https://CRAN.R-project.org/package=bidask.

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Emanuele Guidotti and is being posted with its permission. The views expressed in this material are solely those of the author and/or Emanuele Guidotti and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

IBKR Campus Newsletters

This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.