A comparison of bid-ask spread proxies and determinants of bond bid-ask spread

Su E., Tokmakçıoğlu K.

Borsa Istanbul Review, cilt.21, ss.227-238, 2021 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 21
  • Basım Tarihi: 2021
  • Doi Numarası: 10.1016/j.bir.2020.10.005
  • Dergi Adı: Borsa Istanbul Review
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, EconLit, Directory of Open Access Journals
  • Sayfa Sayıları: ss.227-238
  • Anahtar Kelimeler: Bid-ask spread, Market liquidity, Borsa Istanbul, Bond market, Low-frequency liquidity measures, LIQUIDITY PROXIES, MARKET MICROSTRUCTURE, RETURNS, COSTS
  • İstanbul Teknik Üniversitesi Adresli: Evet

Özet

© 2020 The AuthorsThis paper compares performances of bid-ask spread measures and analyzes bond-level characteristics' effects on the bid-ask spread for Turkish sovereign bonds traded in Borsa Istanbul. We use intraday order data to establish a relative quoted bid-ask spread as a benchmark and compare bid-ask spread measures' estimation performances. Results show that low-frequency spread measures are able to proxy spread dynamics, and one of the measures, Closing Percent Quoted Spread, dominates others. Additionally, we use panel data analysis to examine bond characteristics’ effects on the bid-ask spread. Panel regression analysis points out that bond characteristics have a significant relation with bond liquidity. Bonds with shorter time to maturity or higher trading volume have narrower spreads. Also, bond type significantly affects the bid-ask spread.