Full-text resources of CEJSH and other databases are now available in the new Library of Science.
Visit https://bibliotekanauki.pl


2017 | 1(7) | 90-101

Article title

An Econometric Analysis for the Bid-Ask Spread in the Emerging Chilean Capital Market


Title variants

Languages of publication



The purpose of this paper is to show that different methods for calculating the spread (Bid-Ask) and the methods for annualizing intra-day data affect the results of econometric models. To achieve our goal, we analyze different econometric models in the context of: i) the International Financial Reporting Standards (IFRS) adoption, ii) the reduction of information asymmetry due to new corporate governance standards, and iii) the ownership concentration that characterize the Chilean Capital Market. We test the quality of the information delivered to the market using two information disclosure indices (DIS and Botosan). We find that the definition of spread and the methods for annualizing intraday data it is a key decision and may affect the statistical significance of the variables of a specific model.





Physical description




  • Facultad de Ciencias Económicas y Administrativas Pontificia Universidad Católica de Valparaíso, Chile
  • Facultad de Ciencias Económicas y Administrativas Pontificia Universidad Católica de Valparaíso, Chile
  • Facultad de Ciencias Económicas y Administrativas Pontificia Universidad Católica de Valparaíso, Chile
  • Facultad de Ciencias Económicas y Administrativas Pontificia Universidad Católica de Valparaíso, Chile


  • Amihud, Y. and Mendelson, H. (1989). The Effects of Beta, Bid-Ask Spread, Residual Risk, and Size on Stock Returns. The Journal of Finance, 44(2), 479–486.
  • Armstrong, C.S., Barth, M.E., Jagolinger, A.D. and Riedl, E.J. (2010). Market Reaction to the Adoption of IFRS in Europe. The Accounting Review, 85(1), 31-61.
  • Assidi, S. and Omri, M.A. (2012). IFRS and Information Quality: Cases of CAC 40 Companies. Global. Journal of Management and Business Research, 12(19), 72-83.
  • Bakhshi, M., Bazrafshan, E., Rezaei, M. and Fereidouni, H.G. (2011). The Impact of Corporate Governance on the Bid-Ask Spread: Evidence from an Emerging Market. International Conference on Sociality and Economics DevelopmentIPEDR vol. 10 (2011) © (2011) IACSIT Press, Singapore. Recuperado de http://www.ipedr.com/vol10/97-S10064.pdf
  • Benston, G. and Hagerman, R. (1974). Determinants of Bid-Ask spreads in the over-the-counter market. Journal of Financial Economics, 1, 353–364.
  • Bollen, N.P.B., Smith T. and Whaley, R. (2004). Modeling the bid/ask spread: measuring the inventory-holding premium. Journal of Financial Economics, 72(1),97–141.
  • Botosan, C.A. (1997). Disclosure Level and The Cost of Equity Capital. The Accounting Review,72(3), 323–349.
  • Chan, K. and Chung, P. (2012). Asymmetric Price Distribution and Bid-Ask Quotes in the Stock Options Market.Asia-Pacific. Journal of Financial Studies, 41, 87–102.
  • Chen, W.P., Chung, H., Lee, C. and Liao, W.L. (2007). Corporate Governance and Equity Liquidity: analysis of S&P transparency and disclosure rankings. Corporate Governance: An International Review, 15(4), 644–660.
  • Chung, H. (2006). Investor protection and the liquidity of cross-listed securities: Evidence from the ADR market. Journal of Banking and Finance, 30, 1485-1505.
  • Coloma, F. (2010). Desafíos de la Regulación de Gobiernos Corporativos en Chile. Superintendente de Valores y Seguros. [Challenges of Corporate governance regulations in Chile.] Superintendente de Valores and Seguros. Corporate governance presentation.
  • Copeland, T.E. and Galai, D. (1983). Information Effects on the Bid-Ask Spread. The Journal of Finance, 38(5), 1457–1469.
  • Cormier, D., Ledoux, M.J., Magnan, M. and Aerts, W. (2010). Corporate governance and information asymmetry between managers and investors. Corporate Governance, 10(5), 574–589.
  • Corwin, S.A. and P. Schultz (2012). A Simple Way to Estimate Bid-Ask Spreads from Daily High and Low Prices. The Journal of Finance LXVII, (2): 719–759.
  • Coughenour, C., Paz, A., De la Fuente, H. and Singh, A. (2016). Multinomial logistic regression to estimate and predict perceptions of bicycle and transportation infrastructure in a sprawling metropolitan area. Journal of Public Health, 38(4), e401-e408, doi: 10.1093/pubmed/fdv179.
  • De la Fuente, H., Paz, A., Conover, R. and Khan, A. (2015). Forecasting of financial series for the Nevada department of transportation using deterministic and stochastic methodologies. Procedia Manufacturing, 3, 3317–3324.
  • Demsetz, H. (1968). The Cost of Transacting. The Quarterly Journal of Economics, 82(1), 33–53.
  • Dennis, P. and Weston, J. (2001). Who’s Informed? An Analysis of Stock Ownership and Informed Trading (June 4, 2001). AFA 2002 Atlanta Meetings. Available at SSRN: http://ssrn.com/abstract=267350 or http://dx.doi.org/10.2139/ssrn.267350 Economía and Negocios (2012). Director independiente de Enersis solicita a la SVS que precise tiempos para pronunciarse. [Independent director of Enersis requests the SVS to specify ruling times] (October 24), available at http://www.economiaynegocios.cl/noticias/noticias.asp?id=101888
  • Florou, A. and Pope, P. (2012). Mandatory IFRS Adoption and Institutional Investment Decisions. The Accounting Review, 87(6), 1993–2025.
  • Fu, R., Kraft, A. and Zhang, H. (2012). Financial reporting frequency, information asymmetry, and the cost of equity. Journal of Accounting and Economics, 54(2), 132–149.
  • Gigler, F. and Hemmer, T. (1999). On the frequency, quality, and informational role of mandatory financial reports. Journal of Accounting Research, 36, 117-147.
  • Ghoul, S.E., Guedhami, O., Ni, AND., Pittman, J. and Saadi, S. (2013). Does Information Asymmetry Matter to Equity Pricing? Evidence from Firms’ Geographic Location. Contemporary Accounting Research, 30(1), 140–181.
  • Gjerde, T., Mahenthiran, S. and Cademartori, D. (2013). Effect of ownership, governance, and transparency on liquidity – Chilean evidence. Journal of Contemporary Accounting and Economics, 9(2), 183–202.
  • Glosten, L.R. and Harrris, L.E. (1988). Estimating the Components of the BID/ASK Spread. Journal of Financial Economics, 21(1), 123–142.
  • Gompers, P., Ishi, J. and Metrick, A. (2003). Corporate Governance and Equity Prices. The Quarterly Journal of Economics, 118(1), 107–155.
  • Greenstein, M.M. and Sami, H. (1994). The Impact of the SEC’s Segment Disclosure Requirement on Bid- Ask Spreads. The Accounting Review, 69(1), 179–199.
  • Haat, H.M., Mahenthiran, S., Rahman A.R. and Hamid A.N. (2006). Agency Costsas a Factor in the Suspension of Companies from the Kuala Lumpur Stock Exchange, Journal of Contemporary Accounting and Economics, 2(1), 99–121.
  • Harris, L. (1990). “Statistical Properties of the Roll Serial Covariance Bid/Ask Spread Estimator.” The Journal of Finance LXV (No. 2): 570–590.
  • Healy, P.M. and Palepu, K.G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1–3), 405–440.
  • Kanagaretnam, K., Lobo, G. and Whalen, D. (2007). Does good corporate governance reduce information asymmetry around quarterly earnings announcements? Journal of Accounting and Public Policy, 26(4), 497–522.
  • Karpoff, J.M. (1987). The relation between price changes and trading volume: a survey. Journal of Financial and Quantitative Analysis 22 (1), 109–126.
  • Khurana, I.K., Pereira, R. and Martin, X. (2006). Firms Growth and Disclosure: An Empirical Analysis. Journal of Financial and Quantitative Analysis, 41(2), 357–380.
  • Kothari, S.P., Leone A. and Wasley, C. (2005). Performance Matched Discretionary Accrual Measures. Journal of Accounting and Economics, 39, 163–197.
  • Kunkel, G. (1982). Sufficient conditions for public information to have social value in a productionand exchange economy. Journal of Finance 37, 1005–1013.
  • Lin, J.C., Sanger, G.C. and Booth, G.G. (1995). Trade Size and Components of the Bid-Ask Spread. The Review of Financial Studies, 8e Journal of Financial and Quantitative Analysis 4 (4), 347–400.
  • Marshall, J.M. (1974). Private incentives and public information. The American Economic Review64, 373–390.
  • McInish, T. and Wood, R. (1992). An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks. The Journal of Finance, 47(2), 753–764.
  • Munteanu, L. (2011). Cost of Equity, Financial Information Disclosure, and IFRS adoption: A Literature Review. Internal Auditing and Risk Management, 4(24), 67–80.
  • Organization for Economic Cooperation and Development (OECD). (2011). Strengthening Latin American Corporate governance. The role of institutional investors, 1–80.
  • Rapaport, M. and Sheng, H.H. (2010). Ownership structure and firm value in Brazil. Revista Latinoamericana de Administración, 45, 76–95.
  • Roll, R. (1984). A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market, The Journal of Finance XXXIX, (4): 1127–1139.
  • Rubin, A. (2007). Ownership Level, Ownership Concentration and Liquidity. Journal of Financial Markets, 10(3), 219–248.
  • Sarin, A., Shastri, K. and Shastri, K. (1996). Ownership structure and stock market liquidity. Available at SSRN: http://ssrn.com/abstract=2652
  • Soderstrom, N.S. and Sun, K.J. (2007). IFRS Adoption and Accounting Quality: A Review. European Accounting Review, 16(4), 675–702.
  • Standard and Poor’s. (2006). Standard and Poor’s Corporate Governance Scores, Criteria, Methodology and Definitions.
  • Superintendencia de Valores and Seguros (SVS) (2008). Norma de Carácter General 211. Establece normas para la publicidad de políticas y procedimientos relativos al manejo y divulgación de información para el mercado [General Regulation211. Establishing regulations for publishing policies and procedures for handling and disclosing market information.] Issued 15 January 2008.
  • Trueman, B. (1986). Why do managers voluntarily release earnings forecasts? Journal of Accounting and Economics 8(1), 53–71.
  • Venkatesh, P.C. and Chiang, R. (1986). Information Asymmetry and the Dealer’s Bid-Ask Spread: A Case Study of Earnings and Dividend Announcements. The Journal of Finance, 41(5), 1089–1102.
  • Verrecchia, R. (2001). Essays on disclosure. Journal of Accounting and Economics, 32(1–3), 97–180.

Document Type

Publication order reference



YADDA identifier

JavaScript is turned off in your web browser. Turn it on to take full advantage of this site, then refresh the page.