Abstract
The paper provides empirical investigation of the effective spread and its two components complementing each other: (1) the realized spread and (2) the price impact component. The estimated liquidity measures are derived from high-frequency intraday data on the Warsaw Stock Exchange (WSE). Daily proxies of percentage effective spread, percentage realized spread, and percentage price impact values are analysed for 53 WSE-traded companies divided into three size groups. As the raw dataset does not identify the trade direction, the trade classification Lee and Ready (J Financ 46:733–746, 1991) algorithm is employed to infer the trade side and to distinguish between the so-called buyer- and seller-initiated trades. Moreover, the paper provides a robustness analysis of the obtained results with respect to the whole sample and three adjacent sub-samples, each of equal size: the pre-crisis, Global Financial Crisis (GFC), and post-crisis periods. The evidence is that the empirical results rather do not depend on a firm size and turn out to be robust to the choice of the period. Furthermore, the hypothesis concerning statistical significance of correlation coefficients between daily values of three estimated measures employed in the study is tested.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.