Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices

Implements an efficient estimation procedure of the bid-ask spread from Open, High, Low, and Close prices as proposed in Ardia, Guidotti, Kroencke (2021): https://www.ssrn.com/abstract=3892335

Installation

Install this package with:

install.packages("bidask")

Usage

Load the library:

library("bidask")

Simulate a price process with spread 1%

x <- sim(spread = 0.01)

Estimate the spread

edge(x$Open, x$High, x$Low, x$Close)

By default this is equivalent to

spread(x)

Use a rolling window of 21 periods

spread(x, width = 21)

Compute the spread for each month

ep <- xts::endpoints(x, on = "months")
spread(x, width = ep)

Compute the critical values at 5% and 95%

spread(x, probs = c(0.05, 0.95))

Use multiple estimators

spread(x, method = c("EDGE", "AR", "CS", "ROLL", "OHLC", "OHL.CHL", "GMM"))

Full documentation available on CRAN

Cite as

Ardia, David and Guidotti, Emanuele and Kroencke, Tim Alexander, “Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices”. Available at SSRN: https://ssrn.com/abstract=3892335

A BibTex entry for LaTeX users is:

@unpublished{edge2021,
    author = {Ardia, David and Guidotti, Emanuele and Kroencke, Tim},
    title  = {Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices},
    year   = {2021},
    note   = {Available at SSRN}
    url    = {https://ssrn.com/abstract=3892335}
}