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The Post‐Reform Bid‐Ask Spread Disparity between Nasdaq and the NYSE

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  • Yan He
  • Chunchi Wu

Abstract

We report further evidence of the difference in execution costs between Nasdaq and the NYSE before and after the 1997 market reforms. We find that informed trading costs are consistently higher on Nasdaq both before and after the reforms. In the pre‐reform period the Nasdaq‐NYSE disparity in bid‐ask spreads cannot be completely attributed to the difference in informed trading costs. However, in the post‐reform period the spread difference between these two markets becomes insignificant with the effect of informed trading costs controlled. Our findings are consistent with the contention that the reforms have largely reduced noninformation trading costs and dealers' rents.

Suggested Citation

  • Yan He & Chunchi Wu, 2003. "The Post‐Reform Bid‐Ask Spread Disparity between Nasdaq and the NYSE," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(2), pages 207-224, June.
    • Handle: RePEc:bla:jfnres:v:26:y:2003:i:2:p:207-224
    DOI: 10.1111/1475-6803.00055
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    Cited by:

    1. He, Yan & Wang, Junbo & Wu, Chunchi, 2013. "Domestic versus foreign equity shares: Which are more costly to trade in the Chinese market?," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 465-481.
    2. Kee H. Chung & Xin Zhao, 2003. "Intraday Variation in the Bid‐Ask Spread: Evidence after the Market Reform," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(2), pages 191-206, June.
    3. Wu, Chunchi, 2004. "Information flow, volatility and spreads of infrequently traded Nasdaq stocks," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(1), pages 20-43, February.

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