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Decimals And Liquidity: A Study Of The Nyse

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  • Sugato Chakravarty
  • Robert A. Wood
  • Robert A. Van Ness

Abstract

Using a carefully constructed matched sample of control (nondecimal) stocks, we isolate the effects of decimalization for a sample of NYSE‐listed common stocks trading in decimals. We find that the quoted depth as well as the quoted and effective bid‐ask spreads declined significantly following decimalization. Additionally, both the number of trades and trading volume declined significantly. Stock return volatilities display an initial increase but a decline over the longer term, probably as traders become more comfortable in their new milieu.

Suggested Citation

  • Sugato Chakravarty & Robert A. Wood & Robert A. Van Ness, 2004. "Decimals And Liquidity: A Study Of The Nyse," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 27(1), pages 75-94, March.
    • Handle: RePEc:bla:jfnres:v:27:y:2004:i:1:p:75-94
    DOI: 10.1111/j.1475-6803.2004.00078.x
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