Statistik › Intraday und Marktmikrostruktur › Spread estimators
Daily price estimators recover the true spread at a correlation of 0.90, and overstate it by 25 to 50 basis points
| Benchmark and period | Best single proxy | Correlation | Four proxy average | Observations |
|---|---|---|---|---|
| Trade and quote data, 1993 to 2014 | Gibbs | 0.84 | 0.90 | 1,183,068 |
| The same | Volatility over volume | 0.84 | 0.90 | 1,183,068 |
| Earlier tape, 1983 to 1992 | Close high low | 0.90 | 0.94 | 262,381 |
Correlation of low frequency spread proxies with high frequency effective half spreads, defined as the absolute difference between the trade price and the prevailing quote midpoint, aggregated to daily share weighted then monthly averages. The correlations are reported without standard errors or confidence intervals, and no root mean square error decomposition is printed.
Averaging four low frequency spread proxies gives a correlation of 0.90 with measured effective spreads across 1.18 million observations. The same proxies are biased upward by 25 to 50 basis points after 2003, which is why their authors stop using them for recent data.
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