Estimation of the bid ask spread: applications on the Tunis Stock Exchange

The aim of this paper is to study financial assets price formation process, highlighting bid-ask spread displayed by the Tunisian stock exchange over a sample of 20 securities. Sample period stretches between January 2003 and December 2004. To this effect, we proceed by estimating its two components, transient and permanent, using Glosten and Harris model (1988) which was developed by Ahn, Cai, Hamao and Ho (2004). We concluded that on the one hand the obtained bid-ask spread is inferior to the displayed spread and on the other hand orders processing cost component dominates information asymmetry component.