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Suppose that you are an investor looking to invest $50,000 in a homebuilder stock. You have narrowed down your search to two candidates, Lennar (LEN)
Suppose that you are an investor looking to invest $50,000 in a homebuilder stock. You have narrowed down your search to two candidates, Lennar (LEN) and Toll Brothers (TOL). You do not have a particular opinion about either stock, but want to buy the more liquid stock. First, you compute the percentage spread, that is, the difference between the best ask and best bid, divided by the midpoint (the average of the best ask and best bid). Which stock appears to be more liquid in terms of spread?
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