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Volatility of a stock is definately one reason because the marketmaker who buys and sells from investors has a greater risk of losing money effecting those trades than he does if a stock trades in a fairly narrow range.

But larger spreads can also be justified on higher-priced stocks.

Low trading volume is also another reason. If a stock does not trade a lot, the marketmaker needs a better spread to compensate him for holding the shares in inventory for longer periods of time.
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