Date of Award
Doctor of Philosophy
Recently, many authors have noted anomalies in risk adjusted returns as measured by the Capital Asset Pricing Model (CAPM). The majority of these studies are based implicitly or explicitly on two assumptions: (A) there are no systematic cross-sectional or time-series differences in the probability of a trade occurring at the bid or at the ask, and (B) there are no systematic time-series movements in proportional bid-ask spreads.;In this thesis, I test the validity of these two Assumptions by testing four subsets of Assumption A, using LOGIT regressions and a single subset of Assumption B, using a SUR regression. The Canadian data include time and date stamped intraday bid-ask quotes, transaction prices, and volumes on every security listed on the Toronto Stock Exchange (TSE) over the period January 1979 to December 1987. The U.S. data consists of all securities interlisted on the TSE, NYSE and AMEX during the period January 1984 to December 1987, and includes many active securities such as IBM, GM, Mobil Oil, and American Express.;I find systematic differences in the probability of a bid and ask across days of the week, price stratified portfolios, and times of day. I also find proportional spreads are not stable during the day. Based on these results, I conclude Assumptions A and B are not valid.
Porter, David Carlyle, "Bid-ask Spreads: An Examination Of Systematic Behavior Using Intraday Data On Canadian And Us Exchanges" (1988). Digitized Theses. 1734.