Shen, Pu; Starr, Ross M. - Department of Economics, University of California-San … - 2000
This study models the bid-ask spread in financial markets as a function of asset price variability and order flow. The … (plus or minus half the bid-ask spread). The bid-ask spread adjusts to cover market-makers' average costs. The bid-ask … spread. Thus market liquidity (varying inversely with the bid-ask spread) declines with increasing price and volume …