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Bid-ask spreads and volatility in the foreign exchange market. An empirical analysis

Date
1994-01-01
Authors
Bollerslev, T
Melvin, M
Repository Usage Stats
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Abstract
Consistent with the implications from a simple asymmetric information model for the bid-ask spread, we present empirical evidence that the size of the bid-ask spread in the foreign exchange market is positively related to the underlying exchange rate uncertainty. The estimation results are based on an ordered probit analysis that captures the discreteness in the spread distribution, with the uncertainty of the spot exchange rate being quantified through a GARCH type model. The data sets consists of more than 300,000 continuously recorded Deutschemark/dollar quotes over the period from April 1989 to June 1989. © 1994.
Type
Journal article
Permalink
https://hdl.handle.net/10161/1958
Published Version (Please cite this version)
10.1016/0022-1996(94)90008-6
Publication Info
Bollerslev, T; & Melvin, M (1994). Bid-ask spreads and volatility in the foreign exchange market. An empirical analysis. Journal of International Economics, 36(3-4). pp. 355-372. 10.1016/0022-1996(94)90008-6. Retrieved from https://hdl.handle.net/10161/1958.
This is constructed from limited available data and may be imprecise. To cite this article, please review & use the official citation provided by the journal.
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Scholars@Duke

Bollerslev

Tim Bollerslev

Juanita and Clifton Kreps Distinguished Professor of Economics, in Trinity College of Arts and Sciences
Professor Bollerslev conducts research in the areas of time-series econometrics, financial econometrics, and empirical asset pricing finance. He is particularly well known for his developments of econometric models and procedures for analyzing and forecasting financial market volatility. Much of Bollerslev’s recent research has focused on the analysis of newly available high-frequency intraday, or tick-by-tick, financial data and so-called realized volatility measures, macroeconomic news annou
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