Liquidity Premium and Pricing Implication of H-L Spread Estimate

摘要

By applying the data from 1926 to 2010,this paper presents a detailed examination of the high and low prices based estimates of bid-ask spreads (H-L spread estimate) newly developed by Corwin and Schultz (2012).We focus on testing the liquidity premium of H-L spread estimate.The test also makes comparisons with other commonly adopted liquidity measures such as the price impact of Amihud (2002),turnover,the trading discontinuity measure of Liu (2006),and the quoted bid-ask spread measure.H-L spread estimate has price implication in the pre-1963 time period,which is consistent with the result of Corwin and Schultz (2012) that H-L spread estimate performs better in the early period.However,H-L spread estimate does not have price implication in the post-1963 time period and in the entire sample period.We have a new finding that there is a big difference between the pre-1963 time period and the post-1963 time period for liquidity premium of H-L spread estimate and other popular liquidity measures.