Relation between bid-ask spread and volatility in financial markets

ORAL

Abstract

We establish empirically a linear relation between the bid-ask spread and the volatility per trade in stock markets. We give a theoretical argument explaining this relation and why it should hold on all electronic markets.

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Authors

  • Jean-Philippe Bouchaud

    • Service de Physique de l'Etat Condense, CEA-Saclay, France

  • J. Kockelkoren

  • M. Potters

  • M. Wyart