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http://ssrn.com/abstract=277817
 
 

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Are Nasdaq Stocks More Costly to Trade than NYSE Stocks? Evidence After Decimalization


Kee H. Chung


State University of New York at Buffalo - School of Management

Bonnie F. Van Ness


University of Mississippi - Department of Finance

Robert A. Van Ness


University of Mississippi - Department of Finance

July 24, 2001


Abstract:     
This paper examines execution costs and quote clustering on the NYSE and Nasdaq using 517 matching pairs of stocks after decimalization. We find that the average quoted, effective, and realized spreads of Nasdaq-listed stocks are 18%, 29%, and 58% larger, respectively, than those of NYSE-listed stocks. Stocks with a high proportion of even-sixteenth quotes prior to decimalization continue to show a high degree of quote clustering on nickel and dime quotes. Although quote clustering has a significant effect on both NYSE and Nasdaq spreads, the difference in spreads between the two markets is much larger than the level that can be accounted for by the differences in their stock attributes and quote clustering. Internalization and payment for order flow may still be responsible for the wider spreads of Nasdaq stocks.

Number of Pages in PDF File: 33

Keywords: liquidity, spreads, decimal pricing, quote clustering

JEL Classification: G14, G18

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Date posted: July 27, 2001  

Suggested Citation

Chung, Kee H. and Van Ness, Bonnie F. and Van Ness, Robert A., Are Nasdaq Stocks More Costly to Trade than NYSE Stocks? Evidence After Decimalization (July 24, 2001). Available at SSRN: http://ssrn.com/abstract=277817 or http://dx.doi.org/10.2139/ssrn.277817

Contact Information

Kee H. Chung (Contact Author)
State University of New York at Buffalo - School of Management ( email )
Buffalo, NY 14260
United States
716-645-3262 (Phone)
716-645-3823 (Fax)
HOME PAGE: http://mgt.buffalo.edu/home/faculty/academic/finance/faculty/keechung
Bonnie F. Van Ness
University of Mississippi - Department of Finance ( email )
Oxford, MS 38677
United States
662-915-6749 (Phone)
662-915-7968 (Fax)
Robert A. Van Ness
University of Mississippi - Department of Finance ( email )
Oxford, MS 38677
United States
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