Decimals and Liquidity: A Study of the NYSE

Posted: 22 Jul 2003

See all articles by Sugato Chakravarty

Sugato Chakravarty

Robert Wood

University of Memphis - Fogelman College of Business and Economics

Robert A. Van Ness

University of Mississippi - Department of Finance

Abstract

Using a carefully constructed matched sample of control (nondecimal) stocks, we isolate the effects of decimalization for a sample of NYSE-listed common stocks trading in decimals. We find that the quoted depth as well as the quoted and effective bid-ask spreads declined significantly following decimalization. Additionally, both the number of trades and trading volume declined significantly. Stock return volatilities display an initial increase but a decline over the longer term, probably as traders become more comfortable in their new milieu.

JEL Classification: G14, G18

Suggested Citation

Chakravarty, Sugato and Wood, Robert A. and Van Ness, Robert A., Decimals and Liquidity: A Study of the NYSE. Available at SSRN: https://ssrn.com/abstract=390420

Robert A. Wood

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States
901-678-2670 (Phone)
901-678-3006 (Fax)

HOME PAGE: http://www.people.memphis.edu/~rwood/

Robert A. Van Ness (Contact Author)

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States

No contact information is available for Sugato Chakravarty

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