Review of Quantitative Finance and Accounting

, Volume 22, Issue 4, pp 275–292

Bid-Ask Spreads and Institutional Ownership

Authors

    • Barclays Global Investors andUniversity of South Carolina
Article

DOI: 10.1023/B:REQU.0000032599.58297.1a

Cite this article as:
Fehle, F. Review of Quantitative Finance and Accounting (2004) 22: 275. doi:10.1023/B:REQU.0000032599.58297.1a

Abstract

This paper examines the relation between bid-ask spreads, measured both as effective and specialist-posted spreads, and institutional ownership. For the overall sample, spreads are negatively related to institutional ownership share. The paper suggests that this effect may be due to some institutions being restricted in their trading, which reduces bid-ask spreads. The paper shows that for certain types of institutions, namely banks and investment managers, the above relation reverses. The results are robust to the inclusion of other firm-specific variables such as size, leverage, and financial distress measures.

bid-ask spreadinstitutional ownershipspecialist

Copyright information

© Kluwer Academic Publishers 2004