The Official Closing Versus Last Trade Price for Nasdaq Stocks: Implications for Empirical Research and Automatic Equity Option Exercise

16 Pages Posted: 27 Jul 2005

See all articles by Patrick Catania

Patrick Catania

Chicago Board of Trade Education Research Foundation

Edwin D. Maberly

Monash University

Date Written: March 2006

Abstract

Mongenstern's mantra "scrutinize your data" is as relevant today as when he wrote it over a half century ago. This paper documents discrepancies across data sources in "closing" prices for Nasdaq stocks, which at times are economically meaningful. However, this discrepancy does not apply to listed stocks. Closing stock prices are used to calculate end-of-day index values, daily mutual fund net asset values, and moneyness of equity options. Whenever moneyness breaches threshold levels as established by the Options Clearing Corporation, expiring options are subject to automatic exercise. Closing price data is used by both researchers and investors, thereby potentially resulting in incorrect inferences and inefficient option exercise decisions. This paper documents a need of increased market transparency of procedures governing the determination of closing Nasdaq prices across data vendors.

Keywords: Price Discrepancies, Official Closing Price, Last Trade Price, Nasdaq Stocks, Inefficient Option Exercise Decisions, Institutional Details

JEL Classification: G13

Suggested Citation

Catania, Patrick and Maberly, Edwin D., The Official Closing Versus Last Trade Price for Nasdaq Stocks: Implications for Empirical Research and Automatic Equity Option Exercise (March 2006). Available at SSRN: https://ssrn.com/abstract=760246 or http://dx.doi.org/10.2139/ssrn.760246

Patrick Catania

Chicago Board of Trade Education Research Foundation ( email )

141 West Jackson Blvd.
Chicago, IL 60604-2994
United States
773-239-2633 (Phone)
773-238-2754 (Fax)

Edwin D. Maberly (Contact Author)

Monash University ( email )

Clayton Campus
Wellington Road
Clayton, VIC 3800
Australia
61399055178 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
270
Abstract Views
3,501
rank
113,788
PlumX Metrics