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This does not imply overestimation bias. We expect a negative autocorrelation in high- and ultra-high-frequency (every trade) data due to bid-ask bounce. Bounce occurs when buy and sell orders trading at the offer and bid are interspersed; that yields what seems to be returns even when the bid, ask, and midpoint do not change. The Roll (1984) model examines ...


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There are multiple models for price impact and the one you have listed here is not the latest. You can see a writeup of a few of the most popular and recent models in this answer. We can think of a few reasons why price impact is considered linear in the bid-ask spread. First, you want the trade to be completed (implied by most of these models). You may be ...


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