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The tick/volatility ratio as a determinant of the compass rose: empirical evidence from decimalisation on the NYSE

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  • Michael D. McKenzie
  • Alex Frino

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.

Suggested Citation

  • Michael D. McKenzie & Alex Frino, 2003. "The tick/volatility ratio as a determinant of the compass rose: empirical evidence from decimalisation on the NYSE," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 43(3), pages 331-344, November.
    • Handle: RePEc:bla:acctfi:v:43:y:2003:i:3:p:331-344
    DOI: 10.1111/j.1467-629x.2003.00094.x
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    Cited by:

    1. Constantinos E. Vorlow, 2004. "Stock Price Clustering and Discreteness: The "Compass Rose" and Predictability," Papers cond-mat/0408013, arXiv.org.
    2. Antonios Antoniou & Constantinos E. Vorlow, 2004. "Price Clustering and Discreteness: Is there Chaos behind the Noise?," Papers cond-mat/0407471, arXiv.org.
    3. Mitchell, Heather & McKenzie, Michael D., 2006. "A note on the Wang and Wang measure of the quality of the compass rose," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3519-3524, December.

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