Clustering and Competition in Asset Markets
Economists, financial commentators, regulatory agencies, and the legal community have recently criticized the Nasdaq Stock Market, Inc., because there is greater clustering of stock quotations on even-eighths on Nasdaq than on the New York Stock Exchange or the American Stock Exchange, a phenomenon which critics attribute to collusion or some other defect in Nasdaq market structure. However as this article demonstrates, clustering occurs in varying degrees in many other incontestably competitive financial markets, including the NYSE, the AMEX, the London Stock Exchange, the London gold market, and the international foreign exchange market. This article provides a competitive theory of clustering that emphasizes the effect of uncertainty, the size of transactions, volatility, and the informational and transactional roles of quotations on the degree of clustering In addition, the article examines how market structure can affect the degree of clustering and considers the relation between clustering, spreads, and investors' transactions costs. Coauthors are Merton H. Miller, Kenneth R. Cone, Daniel R. Fischel, and David J. Ross. Copyright 1997 by the University of Chicago.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kadlec, Gregory B & McConnell, John J, 1994. " The Effect of Market Segmentation and Illiquidity on Asset Prices: Evidence from Exchange Listings," Journal of Finance, American Finance Association, vol. 49(2), pages 611-636, June.
- Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
- Clifford A. Ball & Walter N. Torous & Adrian E. Tschoegl, 1985. "The degree of price resolution: The case of the gold market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 5(1), pages 29-43, 03.
- Harris, Lawrence E, 1994. "Minimum Price Variations, Discrete Bid-Ask Spreads, and Quotation Sizes," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 149-178.
- Dale, Charles, 1981. "Brownian motion in the treasury bill futures market," MPRA Paper 46530, University Library of Munich, Germany.
- Loughran, Tim, 1993. "NYSE vs NASDAQ returns : Market microstructure or the poor performance of initial public offerings?," Journal of Financial Economics, Elsevier, vol. 33(2), pages 241-260, April.
- Stevenson, Richard A & Bear, Robert M, 1970. "Commodity Futures: Trends or Random Walks?," Journal of Finance, American Finance Association, vol. 25(1), pages 65-81, March.
- Van Horne, James C, 1970. "New Listings and Their Price Behavior," Journal of Finance, American Finance Association, vol. 25(4), pages 783-794, September.
- Harris, Lawrence, 1991. "Stock Price Clustering and Discreteness," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 389-415.
- Sanger, Gary C. & McConnell, John J., 1986. "Stock Exchange Listings, Firm Value, and Security Market Efficiency: The Impact of NASDAQ," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(01), pages 1-25, March.
- Kerry Cooper, S. & Groth, John C. & Avera, William E., 1985. "Liquidity, exchange listing, and common stock performance," Journal of Economics and Business, Elsevier, vol. 37(1), pages 19-33, February.
When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:v:40:y:1997:i:1:p:23-60. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.