The impact of stock price, trading volume, returns, and return volatility on the bid-ask spread: Study of companies undergoing stock splits

Abstract

This research examines the effects of stock prices, trading volume, stock returns, and return volatility on the bid-ask spread for firms that executed stock splits between January 2020 and August 2023 on the Indonesia Stock Exchange. By employing quantitative methodologies and drawing data from corporate reports and financial databases, the study utilizes multiple linear regression analysis to scrutinize the interrelationships among these variables. The results reveal that elevated stock prices and trading volumes significantly diminish the bid-ask spread, thereby enhancing stock liquidity. Moreover, stock returns exhibit a negative effect on the bid-ask spread, whereas return volatility does not display a noteworthy impact. This research contributes to the theoretical understanding of market dynamics and offers practical implications for companies and investors aiming to comprehend the behavior of bid-ask spreads in the aftermath of stock splits.