An Investigation of Affecting Factors in Bid Ask Spread as a Measure for Information Asymmetry

This study examines the effective factors in bid ask spread as a measure for information asymmetry among listed firms in Tehran’s stock exchange. In this study, the effect of share’s liquidity risk variables, market liquidity risk,, market liquidity, number of transactions, and trading volume of bid ask spread is investigated. In this line, five hypotheses were suggested. A sample consisting of 107 firms (642 firms-year) among the Listed Firms in Tehran’s Stock Exchange (from 2007 to 2012) were collected and tested through combined data method to test the hypotheses. The results verify the first and second hypotheses in that the number of transactions and trading volume has significant relationship with bid ask spread. However, no relationship was found to be between liquidity risk, market liquidity risk, and market liquidity with bid ask spread.