Asymmetric structure of bid-ask spreads across the business cycle

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Title:	Asymmetric structure of bid-ask spreads across the business cycle
Authors:	Chien-Chih Lin
Keywords:	Bid-ask spread;index futures;business cycle;asymmetric information;E32;G13;N25
Date:	2015-09-01
Issue Date:	2016-04-22 13:10:44 (UTC+8)
Publisher:	Routledge
Abstract:	This study argues that the structure of bid-ask spreads is asymmetric across the business cycle. During expansion, investors tend to be overconfident, leading to a higher spread component due to information asymmetry. On the other hand, during recession, the markets are more volatile, leading to a higher spread component due to order processing costs. With TAIEX futures contracts as a sample, it is found that the spread component due to information asymmetry is significantly higher in times of expansion than in times of recession, while the spread component due to order processing cost is significantly higher in times of recession than in times of expansion.
Relation:	Applied Economics Letters 23(7), pp.501-505
DOI:	10.1080/13504851.2015.1083078
Appears in Collections:	[Graduate Institute & Department of Banking and Finance] Journal Article

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