Anything wrong with breaking a buck? An empirical evaluation of NASDAQ's $1 minimum bid price maintenance criterion
AbstractThis paper empirically evaluates the effects of NASDAQ's $1 minimum bid price threshold (known as the one-dollar rule) as part of its listing maintenance criteria. Even though this controversial rule was introduced as early as September 1991, its economic impact has been largely unexplored by academics. This study suggests that implementation of the one-dollar rule is justified for the following reasons: (1) NASDAQ stocks frequently trading below $1 during the pre-rule period are extremely vulnerable to catastrophic losses; (2) a dramatic decline in extreme loss probability is observed among low-priced (relative to $1) stocks after the rule was introduced; and (3) the $1 benchmark serves as an appropriate cutoff point in screening stocks listed on the exchange.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Markets.
Volume (Year): 15 (2012)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/finmar
Exchange listing standards; Low-priced stocks; Extreme tail risk; NASDAQ;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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