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arXiv · 0710.2402

Intraday pattern in bid-ask spreads and its power-law relaxation for Chinese A-share stocks

Xiao-Hui Ni·Wei-Xing Zhou
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Abstract

We use high-frequency data of 1364 Chinese A-share stocks traded on the Shanghai Stock Exchange and Shenzhen Stock Exchange to investigate the intraday patterns in the bid-ask spreads. The daily periodicity in the spread time series is confirmed by Lomb analysis and the intraday bid-ask spreads are found to exhibit $L$-shaped pattern with idiosyncratic fine structure. The intraday spread of individual stocks relaxes as a power law within the first hour of the continuous double auction from 9:30AM to 10:30AM with exponents $\beta_{\rm{SHSE}}=0.19\pm0.069$ for the Shanghai market and $\beta_{\rm{SZSE}}=0.18\pm0.067$ for the Shenzhen market. The power-law relaxation exponent $\beta$ of individual stocks is roughly normally distributed. There is evidence showing that the accumulation of information widening the spread is an endogenous process.

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Xiao-Hui Ni, Wei-Xing Zhou. 2007-10-12. Intraday pattern in bid-ask spreads and its power-law relaxation for Chinese A-share stocks. https://doi.org/10.3938/jkps.54.786

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