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Decimalization and market liquidity

Author

Listed:
  • Craig H. Furfine

Abstract

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.

Suggested Citation

  • Craig H. Furfine, 2003. "Decimalization and market liquidity," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 27(Q IV), pages 2-12.
    • Handle: RePEc:fip:fedhep:y:2003:i:qiv:p:2-12:n:v.27no.4
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    References listed on IDEAS

    as
    1. Hasbrouck, Joel, 1991. "Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March.
    2. Lee, Charles M C & Ready, Mark J, 1991. "Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-746, June.
    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. 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 103-150.
    5. Bessembinder, Hendrik, 2003. "Trade Execution Costs and Market Quality after Decimalization," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(4), pages 747-777, December.
    Full references (including those not matched with items on IDEAS)

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