Analysis of the Microstructure of the Russian Stock Market: Bid-ask Spreads and Risk of Illiquid Shares
Abstract
On the example of Russian shares traded on the RTS in 2006–2010 we investigate the magnitude of bid-ask spreads of shares with different liquidity. It was found that for all shares, regardless of their liquidity, there is a power-type dependence between the magnitude of the average relative bid-ask spread and the frequency of transactions with these shares. This dependence is explained in the framework of the approach, in which the liquidity of the shares is modeled by a combination of imaginary call and put options. This representation allows us to estimate the volatility of prices of illiquid shares, which may be important for practical purposes of corporate finance.
Keywords:
risk, illiquid shares, quotes, bid-ask spread, trade activity, volatility, option, straddle
Downloads
Download data is not yet available.
References
ЛИТЕРАТУРА НА РУССКОМ ЯЗЫКЕ
Брейли Р., Майерс С. 2007. Принципы корпоративных финансов. Пер. с англ. М.: Олимп-Бизнес.
Бухвалов А. В., Дорофеев Е. А., Окулов В. Л. 2010. Лекции по избранным вопросам классических финансовых моделей. СПб.: Изд-во «Высшая школа менеджмента».
Дамодаран А. 2004. Инвестиционная оценка: инструменты и методы оценки любых активов. Пер. с англ. М.: Альпина Бизнес Букс.
Дамодаран А. 2010. Стратегический риск-менеджмент: принципы и методики. Пер. с англ. М.: ИД «Вильямс».
Дорофеев Е. А. 2005. Входы-выходы с рынка фондовых активов: выбор оптимального момента. Вестник С.-Петербургского ун-та. Серия Менеджмент (4): 33–45.
Качалов Р. В. 2002. Управление хозяйственным риском. М.: Наука.
Окулов В. Л. 2000. Количественная оценка ликвидности акций компании на российском фондовом рынке. Рынок ценных бумаг (23): 78–80.
Халл Дж. 2008. Опционы, фьючерсы и другие производные инструменты. Пер. с англ. М.: ИД «Вильямс».
REFERENCES IN LATIN ALPHABET
Amihud Y., Mendelson H. 1986. Asset pricing and the bid-ask spread. Journal of Financial Economics 17 (2): 223–249.
Amihud Y., Mendelson H. 1989. The effects of beta, bid-ask spread, residual risk and size on stock returns. Journal of Finance 44 (2): 479–486.
Ball C., Chordia T. 2001. True spreads and equilibrium prices. Journal of Finance 65 (5): 1801–1835.
Bollen N., Smith T., Whaley R. 2004. Modeling the bid-ask spread: Measuring the inventory-holding premium. Journal of Financial Economics 72 (1): 97–141.
Campbell J., Lo A., MacKinlay A. 1997. The Econometrics of Financial Markets. Princeton University Press: Princeton.
Copeland T., Galai D. 1983. Information effects on the bid-ask spread. Journal of Finance 38 (5): 1457–1469.
Demsetz H. 1968. The сost of transacting. Quarterly Journal of Economics 82 (1): 33–53.
Duffie D. 2001. Dynamic Asset Pricing Theory. Princeton University Press: Princeton.
Finger C., Finkelstein V., Pan G., Lardy J., Ta T.,Tierney J. 2002. CreditGrades. Technical document. RiskMetrics Group Inc. New York. Режим доступа: http://www.creditrisk.ru/publications/files_attached/cgtechdoc.pdf
Harris L. 2003. Trading & Exchanges: Market Microstructure for Practitioners. Oxford University Press: Oxford.
Hasbrouck J. 1991. Measuring the information content of stock trades. Journal of Finance 46 (1): 179–207.
Hasbrouck J. 2007. Empirical Market Microstructure. Oxford University Press: Oxford.
Jong F., Rindi B. 2009. The Microstructure of Financial Markets. Cambridge University Press: Cambridge.
Jorion P. 2007. Financial Risk Manager Handbook. 4th ed. John Wiley & Sons.
Kyle A. 1985. Continuous auctions and insider trading. Econometrica 53 (6): 1315–1335.
Lagoarde-Segot T. 2009. Financial reforms and time-varying microstructures in emerging equity markets. Journal of Banking and Finance 33 (10): 1755–1769.
Liu X. 2007. Bid-ask spread, strike prices and risk-neutral densities. Applied Financial Economics 17 (11): 887–900.
Norden L. 2003. Asymmetric option price distribution and bid-ask quotes: Consequences for implied volatility smiles. Journal of Multinational Financial Management 13 (4–5): 423–441.
Norden L. 2009. Asymmetric futures price distribution and bid-ask quotes. Asia-Pacific Journal of Financial Studies 38 (6): 891–914.
Plerou V., Gopikrishnan P., Stanley H. 2005. Quantifying fluctuations in market liquidity: Analysis of the bid-ask spread. Physical Review E 71 (4, part 2): 046131/1–046131/8.
Zhang H. 2011. Measuring Liquidity in Emerging Markets. PhD Thesis. National University of Singapore. Режим доступа: http://scholarbank.nus.edu.sg/handle/10635/ 23715.
Zumbach G. 2004. How trading activity scales with company size in the FTSE-100. Quantitative Finance 4 (4): 441–456.
The List of References in Cyrillic Transliterated into Latin Alphabet
Brealey R., Myers S. 2007. Printsipy korporativnykh finansov. Per. s angl. M.: Olimp-Biznes.
Bukhvalov А. V., Dorofeev E. А., Okulov V. L. 2010. Lektsii po izbrannym voprosam klassicheskikh finansovykh modelej. SPb.: Izd-vo «Vysshaya shkola menedzhmenta».
Damodaran А. 2004. Investitsionnaya otsenka: instrumenty i metody otsenki lyubykh aktivov. Per. s angl. M.: Аl’pina Biznes Buks.
Damodaran А. 2010. Strategicheskij risk-menedzhment: printsipy i metodiki. Per. s angl. M.: ID «Vil’yams».
Dorofeev E. А. 2005. Vkhody-vykhody s rynka fondovykh aktivov: vybor optimal’nogo momenta. Vestnik SPbGU. Seriya «Menedzhment» (4): 33–45.
Kachalov R. V. 2002. Upravlenie khozyajstvennym riskom. M.: Nauka.
Okulov V. L. 2000. Kolichestvennaya otsenka likvidnosti aktsij kompanii na rossijskom fondovom rynke. Rynok tsennykh bumag (23): 78–80.
Hull J. 2008. Optsiony, f’yuchersy i drugie proizvodnye instrumenty. Per. s angl. M.: ID «Vil’yams».
Downloads
Published
2012-06-28
How to Cite
Okulov, V. L. (2012). Analysis of the Microstructure of the Russian Stock Market: Bid-ask Spreads and Risk of Illiquid Shares. Russian Management Journal, 10(2), 33–50. Retrieved from https://rjm.spbu.ru/article/view/275
Issue
Section
New Research
License
Articles of the Russian Management Journal are open access distributed under the terms of the License Agreement with Saint Petersburg State University, which permits to the authors unrestricted distribution and self-archiving free of charge.
