The Tick/Volatility Ratio as a Determinant of the Compass Rose: Empirical Evidence from Decimalisation on the NYSE

14 Pages Posted: 15 Dec 2003

See all articles by Michael D. McKenzie

Michael D. McKenzie

The University of Sydney - Discipline of Finance; University of Cambridge - Cambridge Endowment for Research in Finance (CERF); Financial Research Network (FIRN)

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Abstract

Recent research suggests that volatility has an important role to play in the appearance of the compass rose pattern. The introduction of decimal prices on the New York Stock Exchange (NYSE) provides an ideal opportunity to test this hypothesis using actual market data. The empirical evidence presented in this paper suggests that the 85 per cent reduction in the tick/volatility ratio resulting from the decimalisation of prices was not sufficient to eliminate the compass rose pattern.

JEL Classification: G10, G12

Suggested Citation

McKenzie, Michael David and Frino, Alex, The Tick/Volatility Ratio as a Determinant of the Compass Rose: Empirical Evidence from Decimalisation on the NYSE. Available at SSRN: https://ssrn.com/abstract=479123

Michael David McKenzie (Contact Author)

The University of Sydney - Discipline of Finance ( email )

Level 2 9 Castlereagh Street
Sydney, NSW 2000
Australia
+61 2 9114 0578 (Phone)
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University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

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Cambridge, CB2 1AG
United Kingdom

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Alex Frino

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
+61 2 9299 1809 (Phone)
+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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