The effects of spread on abnormal return: Evidence from Tehran Stock Exchange

The effects of spread on abnormal return: Evidence from Tehran Stock Exchange

, Samira Vafaee;Darabi, Roya;
management science letters 2015 Vol. 5 pp. 739-742
211
2015themanagement

Abstract

Spread plays essential role on market liquidity on any stock market. A high gap between bid and ask price may reduce the likelihood of trading activities while a small gap between bid and ask increases the chance of trade execution. In this paper, we present an empirical investigation on the effect of spread on abnormal return. The proposed study collects the necessary information from official statements as well as historical data over the period 2009-2013 reported on Tehran Stock Exchange to examine the relationship between spread and unusual firm performance. Using regression analysis, the study has determined a meaningful relationship between abnormal return and spread.

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