Why are spreads wide at the open?
Across essentially every equity market, bid-ask spreads are widest just after the open, tighten rapidly over the first half hour, and stay tight until a mild widening into the close.
Why? Tie your explanation to the components of the spread.
Show a hint
Spread = adverse selection + inventory risk + processing costs. Which components are elevated at 9:30 and why?
Your answer
This one is open-ended. Work it through, then check your reasoning against the full solution.