NASDAQ Trading and Trading Costs: 1993-2002

Posted: 22 May 2005

See all articles by Bonnie F. Van Ness

Bonnie F. Van Ness

University of Mississippi - Department of Finance

Robert A. Van Ness

University of Mississippi - Department of Finance

Richard S. Warr

North Carolina State University

Abstract

Nasdaq spreads decline from 1993 to 2002, largely independently of tick size reductions. Trade size declines, consistent with greater retail investor activity. Using the method of Chordia, Roll, and Subrahmanyam (2001), we find that concurrent market returns strongly affect liquidity and trading activity. Liquidity exhibits distinct day-of-the-week patterns. There is little evidence that macroeconomic announcements or changes in key interest rates affect Nasdaq stocks overall, but in the bear market we find a relation between some of these variables and effective spreads, which we interpret as consistent with Nasdaq participants' paying greater attention to fundamentals after the market crash.

Keywords: Bid-ask spread, liquidity, market microstructure, Nasdaq, order handling rules

JEL Classification: G14, G18

Suggested Citation

Van Ness, Bonnie F. and Van Ness, Robert A. and Warr, Richard S., NASDAQ Trading and Trading Costs: 1993-2002. Available at SSRN: https://ssrn.com/abstract=727305

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 (Contact Author)

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States

Richard S. Warr

North Carolina State University ( email )

BOX 7229
Raleigh, NC 27695-7229
United States
919-513-4646 (Phone)
919-515-6943 (Fax)

HOME PAGE: http://www4.ncsu.edu/~rswarr/

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