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The Intraday Behavior of Bid-Ask Spreads for NYSE Stocks and CBOE Options
Kalok Chan, Y. Peter Chung and Herb Johnson
The Journal of Financial and Quantitative Analysis
Vol. 30, No. 3 (Sep., 1995), pp. 329-346
Published by: Cambridge University Press on behalf of the University of Washington School of Business Administration
Stable URL: http://www.jstor.org/stable/2331344
Page Count: 18
You can always find the topics here!Topics: Stock exchanges, Call options, Standard deviation, Options contracts, Prices, Put options, Quantitative analysis, Modeling, Market power, Securities markets
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We study the intraday behavior of bid-ask spreads for actively traded CBOE options and for their NYSE-traded underlying stocks. We confirm previous findings that stocks have a U-shaped spread pattern; however, the options display a very different intraday pattern--one that declines sharply after the open, and then levels off. Our results suggest that both the degree of competition in market making and the extent of informed trading are important for understanding the intraday behavior of spreads.
The Journal of Financial and Quantitative Analysis © 1995 University of Washington School of Business Administration