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Decimalization and market liquidity

  • Craig H. Furbine
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    This study examines the stocks of 1, 339 companies that began decimal trading on the NYSE on January 29, 2001. Using the price impact of a trade as a measure of liquidity, the author finds that decimalization typically led to an improvement in liquidity.

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    File URL: http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2003/4qeppart1.pdf
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    Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

    Volume (Year): (2003)
    Issue (Month): Q IV ()
    Pages: 2-12

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    Handle: RePEc:fip:fedhep:y:2003:i:qiv:p:2-12:n:v.27no.4
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    1. Lee, Charles M C & Ready, Mark J, 1991. " Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-46, June.
    2. Seppi, Duane J, 1997. "Liquidity Provision with Limit Orders and a Strategic Specialist," Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 103-50.
    3. Chakravarty, Sugato & Wood, Robert A. & Harris, Stephen P., 2002. "Decimal Trading and Market Impact," Purdue University Economics Working Papers 1154, Purdue University, Department of Economics.
    4. Hasbrouck, Joel, 1991. " Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March.
    5. Bessembinder, Hendrik, 2003. "Trade Execution Costs and Market Quality after Decimalization," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(04), pages 747-777, December.
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