Does market structure matter?Trading costs and return volatility around exchange listings
We document that bid-ask spreads decrease substantially for stocks that moved from Nasdaq to the NYSE between 1996 and 2000, and that spread reductions continued to be observed after the 1997 market reforms. Somewhat surprising in light of these reforms, the largest spread reductions are for stocks...
| Main Authors: | , |
|---|---|
| Format: | Working Paper |
| Published: |
School of Economics and Finance, Curtin Business School
2008
|
| Subjects: | |
| Online Access: | http://hdl.handle.net/20.500.11937/6543 |
| _version_ | 1848745105940283392 |
|---|---|
| author | Bessembinder, H. Rath, Subhrendu |
| author_facet | Bessembinder, H. Rath, Subhrendu |
| author_sort | Bessembinder, H. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | We document that bid-ask spreads decrease substantially for stocks that moved from Nasdaq to the NYSE between 1996 and 2000, and that spread reductions continued to be observed after the 1997 market reforms. Somewhat surprising in light of these reforms, the largest spread reductions are for stocks where Nasdaq liquidity providers round quotations most often. We extend the analysis to document that average return volatility also decreases substantially after exchange listing. However, spreads, volatility, and trading activity are determined jointly in equilibrium, implying that simple before versus after comparisons may not reveal structural effects. The results of simultaneous equation estimation indicate that decreases in average bid-ask spreads are attributable to market structure, while reductions in volatility and trading volume can be attributed to changes in other endogenous and exogenous variables, including the spread reduction. |
| first_indexed | 2025-11-14T06:12:05Z |
| format | Working Paper |
| id | curtin-20.500.11937-6543 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T06:12:05Z |
| publishDate | 2008 |
| publisher | School of Economics and Finance, Curtin Business School |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-65432017-10-02T02:27:19Z Does market structure matter?Trading costs and return volatility around exchange listings Bessembinder, H. Rath, Subhrendu return volatility market structure exchange listings We document that bid-ask spreads decrease substantially for stocks that moved from Nasdaq to the NYSE between 1996 and 2000, and that spread reductions continued to be observed after the 1997 market reforms. Somewhat surprising in light of these reforms, the largest spread reductions are for stocks where Nasdaq liquidity providers round quotations most often. We extend the analysis to document that average return volatility also decreases substantially after exchange listing. However, spreads, volatility, and trading activity are determined jointly in equilibrium, implying that simple before versus after comparisons may not reveal structural effects. The results of simultaneous equation estimation indicate that decreases in average bid-ask spreads are attributable to market structure, while reductions in volatility and trading volume can be attributed to changes in other endogenous and exogenous variables, including the spread reduction. 2008 Working Paper http://hdl.handle.net/20.500.11937/6543 School of Economics and Finance, Curtin Business School fulltext |
| spellingShingle | return volatility market structure exchange listings Bessembinder, H. Rath, Subhrendu Does market structure matter?Trading costs and return volatility around exchange listings |
| title | Does market structure matter?Trading costs and return volatility around exchange listings |
| title_full | Does market structure matter?Trading costs and return volatility around exchange listings |
| title_fullStr | Does market structure matter?Trading costs and return volatility around exchange listings |
| title_full_unstemmed | Does market structure matter?Trading costs and return volatility around exchange listings |
| title_short | Does market structure matter?Trading costs and return volatility around exchange listings |
| title_sort | does market structure matter?trading costs and return volatility around exchange listings |
| topic | return volatility market structure exchange listings |
| url | http://hdl.handle.net/20.500.11937/6543 |