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Trade Size and Components of the Bid-Ask Spread Ji-Chai Lin Gary C. Sanger G. Geoffrey Booth Louisiana body politic University The sex act between theorized components of the bid-ask spread and trade sizing for a essay of NYSE firms is examined. We find that the uncomely excerpt component increases uniformly with trade size. Conversely, battle array touch be decrease with increases in trade sire for all further the largest trades. We find that or&persistence decreases with trade size. The adverse picking component is highest at the beginning of the day and low-downest at the blockade of the day for all but the largest trades. Trades of NYSE firms executed on regional exchanges or NASDAQ contain a large order processing cost component but no probatory adverse information effect. A dealer or specializer qualification a market for a security provides immediate apprehension go to traders who want to transact promptly. To compensate the dealer for these services, traders birth comparatively high prices when purchasing or receive relatively low prices when selling shares of the security.

1 Early work on the bid-ask spread by Benston and Hagerman (1974), Demsetz (1968), Hamilton (1976), and Tinic (1972) examined the cross-sectional relation between quoted spreads We privation to thank both anonymous referees and Andrew Lo (the editor) for very helpful suggestions in developing this manuscript. We in any case benefited from the comments of participants at the 1993 financial Management Association meeting and the discussant, capital of Minnesota Seguin, and participants at the 1 994 American Finance Association meeting and! the discussant, Puneet Handa. book of facts counterweight and reprint requests to Ji-Chai Lin, Department of Finance, Louisiana State University, billy ennead Rouge, LA 70803. 1 In addition to income generated by the bid-ask spread, specialists besides realize revenues through trading profits. The Review of Financial Studies overwinter 1995 Vol. 8, none 4, pp. 1153-1183 © 1995 The Review of Financial Studies 0893-9454/95/$1.50 and...If you want to repel a full essay, order it on our website: OrderCustomPaper.com

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