Citation
(2012), "2011 Awards for Excellence", International Journal of Managerial Finance, Vol. 8 No. 1. https://doi.org/10.1108/ijmf.2012.29108aaa.001
Publisher
:Emerald Group Publishing Limited
Copyright © 2012, Emerald Group Publishing Limited
2011 Awards for Excellence
The following article was selected for this year's Outstanding Paper Award for International Journal of Managerial Finance
"Spread decomposition with common spread components"
Thomas Henker Australian School of Business, Banking and Finance, University of New South Wales, Sydney, Australia
Martin Martens Erasmus University, Rotterdam, The Netherlands
Purpose – This paper aims to incorporate a market wide buying and selling pressure cost component into a spread decomposition model as spread cost component.
Design/methodology/approach – The paper extends a commonly used trade indicator spread decomposition model to include a component common to all stocks of a specialist firm and a market wide component common to all stocks.
Findings – Strong evidence is found that specialists consider this common factor cost component when they set bid and ask quotes. Some specialist firms also take the next logical step and specifically manage their firm wide stock inventories. The common factor is in percentage terms largest for securities with the highest trade frequencies.
Research limitations/implications – The relative importance of the common factor spread component decreases as the pricing grid becomes finer, but remains highly significant under the decimal trading regime.
Originality/value – This is the first study to document not-security-specific spread cost components that are common to all stocks for which a specialist firm makes markets and to all stocks in the market. Using the model it is shown that market wide uncertainty translates into spreads of individual securities.
Keywords: Bid offer spreadsFinancial markets, Securities
www.emeraldinsight.com/10.1108/17439131011032031
This article originally appeared in Volume 6 Number 2, 2010, pp. 88-115 International Journal of Managerial Finance
The following article was selected for this year's Highly Commended Award
"A note on capital structure target adjustment – Indonesian evidence"
Ludwig Reinhard and Steven Li
This article originally appeared in Volume 6 Number 3, 2010 International Journal of Managerial Finance