Picking a thorny rose: Optimal trading with spread‐based return predictability
研究发现小盘股的时变价差能预测大小盘股未来的收益差距，并提出了最优交易策略，在利用可预测性的同时降低交易成本，对关注小盘股投资价值的学者和投资者有参考价值。
Abstract Small stocks' time‐varying spreads predict future return gap between small and large stocks. To optimally exploit such predictability, the investor captures current risk premium by purchasing at large spreads with substantially reduced turnover; uses an aim‐in‐front‐of‐the‐target approach to trade‐off between future risk premium and current transaction costs; and meets hedging demand at low costs. Strong interaction between transaction costs and return predictability leads to large losses from myopic trading. Greater variability of the spread is advantageous for investors who trade optimally but detrimental for investors who trade myopically. The spread‐based return predictability significantly increases the investment value of small stocks.