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Nasdaq Trading and Trading Costs: 1993–2002

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  • Bonnie F. Van Ness
  • Robert A. Van Ness
  • Richard S. Warr

Abstract

Nasdaq spreads decline from 1993 to 2002, largely independently of tick‐size reductions. Trade size declines, consistent with greater retail investor activity. Using the method of Chordia, Roll, and Subrahmanyam (2001), we find that concurrent market returns strongly affect liquidity and trading activity. Liquidity exhibits distinct day‐of‐the‐week patterns. There is little evidence that macroeconomic announcements or changes in key interest rates affect Nasdaq stocks overall; but in the bear market, we find a relation between some of these variables and effective spreads, which we interpret as consistent with Nasdaq participants' paying greater attention to fundamentals after the market crash.

Suggested Citation

  • Bonnie F. Van Ness & Robert A. Van Ness & Richard S. Warr, 2005. "Nasdaq Trading and Trading Costs: 1993–2002," The Financial Review, Eastern Finance Association, vol. 40(3), pages 281-304, August.
    • Handle: RePEc:bla:finrev:v:40:y:2005:i:3:p:281-304
    DOI: 10.1111/j.1540-6288.2005.00103.x
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    References listed on IDEAS

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