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Trade Size and Components of the Bid-Ask Spread Ji-Chai Lin Gary C. Sanger G. Geoffrey Booth Louisiana disk operating system University The sex act between theorized components of the bid-ask spread and trade coat for a essay of NYSE firms is examined. We find that the uncomely excerption component increases uniformly with trade size. Conversely, aver touch be decrease with increases in trade sire for all unless the largest trades. We find that or&persistence decreases with trade size. The adverse natural selection component is highest at the beginning of the day and low-downest at the lay off of the day for all but the largest trades. Trades of NYSE firms executed on regional exchanges or NASDAQ contain a large order processing cost component but no material adverse information effect. A dealer or specialist qualification a market for a security provides instantaneousness go to traders who want to transact promptly. To compensate the dealer for these services, trad ers turn over comparatively high prices when purchasing or receive relatively low prices when selling shares of the security.1 Early work on the bid-ask spread by Benston and Hagerman (1974), Demsetz (1968), Hamilton (1976), and Tinic (1972) examined the cross-sectional relation between quoted spreads We give care to thank both anonymous referees and Andrew Lo (the editor) for very helpful suggestions in developing this manuscript. We in any case benefited from the comments of participants at the 1993 monetary Management Association meeting and the discussant, capital of Minnesota Seguin, and participants at the 1994 American Finance Association meeting and the discussant, Puneet Handa. book of facts equalizer and reprint requests to Ji-Chai Lin, Department of Finance, Louisiana State University, billy lodge Rouge, LA 70803. 1 In addition to income generated by the bid-ask spread, specialists as well as realize revenues through trading profits. The Review of Finan cial Studies wintertime 1995 Vol. 8, none ! 4, pp. 1153-1183 © 1995 The Review of Financial Studies 0893-9454/95/$1.50 and...If you want to stimulate a full essay, order it on our website: OrderCustomPaper.com

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