A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market

Richard Roll · 1984 · The Journal of Finance

BeginnerIntradayLFTMethod

Estimates the effective spread from the negative autocovariance of price changes. Handy when you only have trade prices.

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At a glance

Level: Beginner: No prior microstructure or stochastic calculus needed
Horizon: Intraday, LFT
Data needed: Daily bars, Trades Set what data you have
Themes: Microstructure
Assets: Equities
Market: Global

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Cite

@article{roll1984simple,
  author = {Roll, Richard},
  title = {{A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market}},
  journal = {The Journal of Finance},
  year = {1984},
  doi = {10.2307/2327617}
}

Roll, R. (1984). A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market. The Journal of Finance. https://doi.org/10.2307/2327617