Components of the Bid Ask Spread of Shares Traded at the National Stock Exchange of India – Analysis of Select Industries

Journal Name: 
Journal of Accounting and Finance
Volume: 
Vol. 29 - No. 1
Authors: 
Author Name Designation Organization
A. Geetha
Abstract: 

The components of the Bid Ask spread are calculated for a sample of 200 shares traded on the National Stock Exchange of India. These sample of shares belong to two sectors – the services sector and themanufacturing sector, each having 10 companies. The analysis was done for a period of three months from October 2014 to December 2014. The Madhavan Richardson and Roomans model was used in the study. It was found that the Adverse Selection Cost and the Order Processing Cost are almost similar for the two sectors. No particular distinction has been made between the two sectors. These costs exhibit a “ U” shaped patters over the period for the two sectors. Inventory costs are not given importance for limit order market like the National Stock Exchange of India