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  3. 2b) a stock traded at an average price of $30 over

2b) A stock traded at an average price of $30 over the course of a...

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Finance

2b) A stock traded at an average price of $30 over the course of a trading day. The covariance of successive transaction price changes (trade-by-trade changes in the price) is about -0.05. Using Rolls model, what is your estimate of the bid-ask spread of the stock (measured in percent of the average price of $30)?

(9 marks)

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