Volume and Assets as Determinants of ETF Bid-Ask Spreads

Riepe, Mark W.; Iachini, Michael
May 2011
Journal of Financial Planning;May2011, Vol. 24 Issue 5, p32
Academic Journal
The article presents a study on the effect of security volume on the bid-ask spreads of exchange traded funds (ETF) in the U.S. It notes that the data used for the analysis of bid-ask were collected from ArcaVision. Results show that ETF's bid-ask spread correlates stronger with dollar volume than with assets. The article says that volume and assets on bid-ask spread have stronger explanatory power for diversified equity and alternative ETF, but they were weaker for sector and bond ETF. It concludes that the relationship of volume with bid-ask spreads of ETF is log-linear.


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