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A simple approximation of intraday spreads using daily data

Elsevier B.V.
DOI: 10.1016/j.finmar.2013.02.004
  • Bid-Ask Spreads
  • Taq
  • Crsp
  • Market Liquidity
  • Information Asymmetry
  • Low-Frequency Liquidity Measures


Abstract This study examines the relation between the bid-ask spread from the daily CRSP data and the bid-ask spread from the intraday TAQ data. We show that the CRSP-based spread is highly correlated with the TAQ-based spread across stocks using data from 1993 through 2009. The simple CRSP-based spread provides a better approximation of the TAQ-based spread than all other low-frequency liquidity measures in cross-sectional settings. However, the CRSP-based spread is highly correlated with the TAQ spread in time-series settings only for NASDAQ stocks. Overall, our results suggest that the simple CRSP-based spread could be used in lieu of the TAQ-based spread in academic research that focuses on cross-sectional analysis.

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