Decimals and Liquidity: A Study of the NYSE
Posted: 22 Jul 2003
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: Suggested Citation