bidask (version 2.1.4)

edge_rolling: Rolling Estimates of Bid-Ask Spreads from Open, High, Low, and Close Prices

Description

Implements a rolling window calculation of the efficient estimator of bid-ask spreads from open, high, low, and close prices described in Ardia, Guidotti, & Kroencke (JFE, 2024): tools:::Rd_expr_doi("10.1016/j.jfineco.2024.103916").

Usage

edge_rolling(open, high, low, close, width, sign = FALSE, na.rm = FALSE)

Value

Vector of spread estimates. A value of 0.01 corresponds to a spread of 1%. This function always returns a result of the same length as the input prices.

Arguments

open

numeric vector of open prices.

high

numeric vector of high prices.

low

numeric vector of low prices.

close

numeric vector of close prices.

width

if an integer, the width of the rolling window. If a vector with the same length of the input prices, the width of the window corresponding to each observation. Otherwise, a vector of endpoints. See examples.

sign

whether to return signed estimates.

na.rm

whether to ignore missing values.

Details

Prices must be sorted in ascending order of the timestamp.

References

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. tools:::Rd_expr_doi("10.1016/j.jfineco.2024.103916")

Examples

# reduce number of threads to pass CRAN checks (you can ignore this)
data.table::setDTthreads(1)

# simulate open, high, low, and close prices with spread 1%
x <- sim(n = 1000, spread = 0.01)

# estimate the spread using a rolling window
s <- edge_rolling(x$Open, x$High, x$Low, x$Close, width = 21)
tail(s)

# estimate the spread using custom endpoints
ep <- c(3, 35, 100)
s <- edge_rolling(x$Open, x$High, x$Low, x$Close, width = ep)
s[c(35, 100)]
# equivalent to
edge(x$Open[3:35], x$High[3:35], x$Low[3:35], x$Close[3:35])
edge(x$Open[35:100], x$High[35:100], x$Low[35:100], x$Close[35:100])

# estimate the spread using an expanding window
s <- edge_rolling(x$Open, x$High, x$Low, x$Close, width = 1:nrow(x))
tail(s)
# equivalent to
s <- edge_expanding(x$Open, x$High, x$Low, x$Close, na.rm = FALSE)
tail(s)