Spread determinants and the day-of-the-week effect

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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.

Original languageEnglish
Pages (from-to)51-60
Number of pages10
JournalQuarterly Review of Economics and Finance
Volume54
Issue number1
DOIs
Publication statusPublished - Feb 2014
Externally publishedYes

Keywords

  • Bid-ask spread
  • Day-of-the-week
  • Panel Error Correction
  • Sectors

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