Python for Finance by unknow

Author:unknow
Language: eng
Format: epub
Publisher: Packt Publishing

The corresponding output is shown as follows:

According to the 52-week high and low trading strategy, we have more incentive to buy IBM's stock today.

Roll's model to estimate spread (1984)

Liquidity is defined as how quickly we can dispose of our asset without losing its intrinsic value. Usually, we use spread to represent liquidity. However, we need high-frequency data to estimate spread. Later in the chapter, we show how to estimate spread directly by using high-frequency data. To measure spread indirectly based on daily observations, Roll (1984) shows that we can estimate it based on the serial covariance in price changes as follows:

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