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README.md
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README.md

Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices

Implements the efficient estimator of bid-ask spreads from open, high, low, and close prices described in Ardia, Guidotti, & Kroencke (JFE, 2024): https://doi.org/10.1016/j.jfineco.2024.103916

Installation

Download the SAS file edge.sas into your working directory. For instance:

wget https://github.com/eguidotti/bidask/raw/main/sas/edge.sas

Usage

The code reads a SAS dataset containing open, high, low, close prices for multiple groups, and saves the spread estimates to an output file. Run the file edge.sas from the command line as follows:

sas edge.sas \
  -set in <...> \
  -set out <...> \
  -set by <...> \
  -set open <...> \
  -set high <...> \
  -set low <...> \
  -set close <...> \
  -set sign <...>
field description
in The path to a SAS dataset containing open, high, low, and close prices for multiple groups.
out The name of the file to output spread estimates. See here for supported file extensions.
group Comma separated list of column(s) to group by; e.g., symbol or date,symbol.
open The name of the column containing open prices.
high The name of the column containing high prices.
low The name of the column containing low prices.
close The name of the column containing close prices.
sign Boolean value (0/1) indicating whether to return signed estimates.

The input prices must be sorted in ascending order of the timestamp within each group.

The output value is the spread estimate. A value of 0.01 corresponds to a spread of 1%.

Example

The file ohlc.sas7bdat contains simulated open, high, low, and close prices as described here for two symbols. Download the file into your working directory. For instance:

wget https://github.com/eguidotti/bidask/raw/main/sas/ohlc.sas7bdat

Estimate the spread for each symbol:

sas edge.sas \
  -set in ohlc.sas7bdat \
  -set out edge.csv \
  -set by Symbol \
  -set open Open \
  -set high High \
  -set low Low \
  -set close Close \
  -set sign 0

The output file edge.csv contains the following estimates:

Symbol EDGE
A 0.0101849035
B 0.0101849035

Cite as

Ardia, D., Guidotti, E., Kroencke, T.A. (2024). Efficient Estimation of Bid-Ask Spreads from Open, High, Low, and Close Prices. Journal of Financial Economics, 161, 103916. doi: 10.1016/j.jfineco.2024.103916

A BibTex entry for LaTeX users is:

@article{edge,
  title = {Efficient estimation of bid–ask spreads from open, high, low, and close prices},
  journal = {Journal of Financial Economics},
  volume = {161},
  pages = {103916},
  year = {2024},
  doi = {https://doi.org/10.1016/j.jfineco.2024.103916},
  author = {David Ardia and Emanuele Guidotti and Tim A. Kroencke},
}