Did Decimalization Benefit Members of the Toronto Stock Exchange?

Quarterly Journal of Business and Economics, Vol. 45, No. 3/4 (Summer - Autumn, 2006), pp. 49-67

University of Alberta School of Business Research Paper No. 2013-220

Posted: 24 May 2013 Last revised: 30 May 2013

See all articles by Mark R. Huson

Mark R. Huson

University of Alberta - Department of Finance and Statistical Analysis

Youngsoo Kim

University of Regina

Vikas Mehrotra

University of Alberta - Department of Finance and Statistical Analysis

Date Written: October 23, 2005

Abstract

We examine the impact of adopting decimal price quotes on the welfare of members of the Toronto Stock Exchange (TSX) based on a multivariate analysis of seat prices. Consistent with existing studies, we find that decimalization leads to lower bid-ask spreads as well as lower quoted depths. To see if the combined effect of these changes benefited TSX members, we examine changes in the TSX's market share and total trading volume of interlisted stocks. In addition, we measure the wealth effect of decimalization on the TSX members using a multivariate analysis of seat prices. Our results suggest that TSX members anticipated positive benefits from decimalization, and that the switch to decimal prices had not adversely affected them.

Suggested Citation

Huson, Mark R. and Kim, Youngsoo and Mehrotra, Vikas, Did Decimalization Benefit Members of the Toronto Stock Exchange? (October 23, 2005). Quarterly Journal of Business and Economics, Vol. 45, No. 3/4 (Summer - Autumn, 2006), pp. 49-67; University of Alberta School of Business Research Paper No. 2013-220. Available at SSRN: https://ssrn.com/abstract=2269254

Mark R. Huson

University of Alberta - Department of Finance and Statistical Analysis ( email )

4-20C Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2803 (Phone)
780-492-3325 (Fax)

Youngsoo Kim

University of Regina ( email )

3737 Wascana Parkway
Regina, Saskatchewan S4S OA2 S4S 0A1
Canada
(306) 585-5647 (Phone)

Vikas Mehrotra (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

School of Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2976 (Phone)
780-492-3325 (Fax)

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