We're using cookies, but you can turn them off in your browser settings. Otherwise, you are agreeing to our use of cookies. Learn more in our Privacy Policy

Bridge over ocean
1 September 1995 Financial Analysts Journal Volume 51, Issue 5

Window Dressing of Daily Closing Bid–Ask Spreads: Evidence from NYSE Stocks

  1. Hasung Jang
  2. Jae Ha Lee

Closing spreads for NYSE stocks are the narrowest of the day compared with spreads during ordinary trading hours. They are also substantially narrower than the spreads immediately preceding them. With no affirmative obligation to trade at their closing quotes, specialists appear to reduce bid–ask spreads sharply at the market close and report them to the exchange solely for the purpose of window dressing. This window dressing effect is more prominent for the stocks with larger daily average spreads, and it results mainly from an abrupt increase in the bid price at the market close. Academicians, practitioners, and market regulators should be aware that reported official closing spreads are downward biased and interpret them with caution.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content