AN IMPLICIT MEASURE OF THE EFFECTIVE BID-ASK SPREAD - A NOTE

We extend Roll's study of the effective bid-ask spread in an efficient market environment by allowing for serially cor-related order arrival and quote behavior. This extension results in a more general effectiv e bid-ask spread measure, which precludes imaginary spreads and includ es Roll's measure as a special case when the serial correlation is zer o. This new measure is related to the length of the measurement interv al due to the serial correlation, and thus has the potential to explai n the previously observed differential between weekly and daily derive d spreads.