Market Structure and Reported Trading Volume: NASDAQ Versus the NYSE
J. OF FINANCIAL RESEARCH
Posted: 12 Mar 1997
Trading volume for common stocks is of interest to financial economists, investors, and securities lawyers. NASDAQ is a dealer market where trades with dealers are included in reported trading volume. This procedure does not accurately measure the volume of trading by public buyers and sellers. Trading volume reported on the New York Stock Exchange (NYSE), which is primarily an auction market, provides a much closer measure of trades by public investors. We examine a sample of firms whose stock traded on the NASDAQ National Market System (NMS)and subsequently on the NYSE. When trading switches to the NYSE, the firms' trading volumes drop to about 50 percent of the volume previously reported on NASDAQ. A control group of firms that switch from the American Stock Exchange (AMEX) to the NYSE shows a small, but statistically insignificant, increase in trading volume.
JEL Classification: G14
Suggested Citation: Suggested Citation