𝔖 Bobbio Scriptorium
✦   LIBER   ✦

Risk Aversion and the Bid–Ask Spread

✍ Scribed by P. Roger; L. Eeckhoudt


Book ID
108559600
Publisher
John Wiley and Sons
Year
1999
Tongue
English
Weight
423 KB
Volume
5
Category
Article
ISSN
1354-7798

No coin nor oath required. For personal study only.


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This article notes that dealers' bid/ask spreads should vary directly with their costs of adjusting to inventory imbalances. Thus, well-diversified dealers are expected to quote lower bid/ask spreads on stocks with substantial total risk caused by undiversifiable risk. Furthermore, the effect of sys