McInish is the Wunderlich Chair of Excellence in Finance and Wood is a Distinguished Professor of Finance at Memphis State University in Tennessee. The authors wish to thank Yakov Amihud, Anat Admati, John Burke, Kalman Cohen, Joel Hasbrouck, Albert (Pete) Kyle, Larry Lockwood, and Keith Ord.
An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks
Article first published online: 30 APR 2012
1992 The American Finance Association
The Journal of Finance
Volume 47, Issue 2, pages 753–764, June 1992
How to Cite
MCINISH, T. H. and WOOD, R. A. (1992), An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks. The Journal of Finance, 47: 753–764. doi: 10.1111/j.1540-6261.1992.tb04408.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
The behavior of time-weighted bid-ask spreads over the trading day are examined. The plot of minute-by-minute spreads versus time of day has a crude reverse J-shaped pattern. Schwartz identifies four determinants of spreads: activity, risk, information, and competition. Using a linear regression model, a significant relationship between these same factors and intraday spreads is demonstrated, but dummy variables for time of day have a reverse J-shape. For given values of the activity, risk, information and competition measures, spreads are higher at the beginning and end of the day relative to the interior period.