Asymmetries in Bid-Ask Responses to Innovations in the Trading Process.

Abstract

This paper has benefited from the support of the Spanish DGICYT project #PB98-0030 and the European Project on VPM-Improving Human Research Potential, HPRN-CT-2002-00232. The authors are grateful for the comments received from an anonymous referee and from Mikel Tapia, Ignacio Peña, Winfried Pohlmeier and the attendants to the Econometrics Research Seminar at C.O.R.E., Université Catholique de Louvain, Belgium. We also appreciate the suggestions of participants at the CAF Market Microstructure and High Frequency Data in Finance Workshop, August 2001, Sønderborg (Denmark), and the European Financial Association Meeting, August 2001, Barcelona (Spain)Market microstructure; Bid and ask time series; VEC models; Adverse-selection costs; Asymmetric dynamics;