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- Title
Determinants of Bid/Ask Spread in an Emerging African Stock Market : A Dynamic Panel Data Framework.
- Authors
SEETANAH, BOOPEN; ROJID, SAWKUT
- Abstract
This paper investigates the determinants of the bid-ask spread on the Stock Exchange of Mauritius using the dynamic Generalised Methods of Moments (GMM) panel data techniques. Specifying a spread equation and using data for the 38 companies listed on the SEM over the period 4th January to 30th April 2009 we found that the bid ask spread is determined by its lagged and is thus of a dynamic nature, adjusting to a target. A positive and significant coefficient is observed between bid-ask spread and closing stock price. There is also evidence that average spread tends to decline for large volumes of trade and such is also the case for the size of firm with the latter having a relatively higher influence on the bid-ask spread. The direct relationship between variance of returns and spread is also confirmed while we could not find any relationship between expected return on the stock.
- Subjects
ASKED price; SPREAD (Finance); PRICES of securities; MOMENTS method (Statistics); PANEL analysis
- Publication
Finance India, 2012, Vol 26, Issue 3, p803
- ISSN
0970-3772
- Publication type
Article