Chinese stock bid-ask spread estimation and industry analysis

Bid-ask spread is an important indicator of market liquidity. In order to explore the characteristics of stock bid-ask spread in their industry and their changes over time mode. This paper uses Corwin(2010)´s new approach to estimate bid-ask spread, deal with the day´s high and low price to calculate the spread, programmed and computed nearly 20 years and containing almost all of the stocks, importantly, categorized and analyzed the stock spread according to its industry property. Shanghai´s spread was significantly lower than the Shenzhen´s. And the spread show greater volatility when market ups or downs. However, the standard deviation of bid-ask spread in the whole time was gradually reduced. Different industries´ bid-ask spread were highly relevant, but its variance were significant differences. By the impact of industrial policy, industries´ bid-ask spread changed largely over the year.