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

dc.contributor.author

Bollerslev, T

dc.contributor.author

Melvin, M

dc.date.accessioned

2010-03-09T15:33:53Z

dc.date.issued

1994-01-01

dc.description.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.

dc.identifier.issn

0022-1996

dc.identifier.uri

https://hdl.handle.net/10161/1958

dc.language.iso

en_US

dc.publisher

Elsevier BV

dc.relation.ispartof

Journal of International Economics

dc.relation.isversionof

10.1016/0022-1996(94)90008-6

dc.title

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

dc.type

Journal article

pubs.begin-page

355

pubs.end-page

372

pubs.issue

3-4

pubs.organisational-group

Duke

pubs.organisational-group

Economics

pubs.organisational-group

Trinity College of Arts & Sciences

pubs.publication-status

Published

pubs.volume

36

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