Premium
The tick/volatility ratio as a determinant of the compass rose: empirical evidence from decimalisation on the NYSE
Author(s) -
McKenzie Michael D.,
Frino Alex
Publication year - 2003
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2003.00094.x
Subject(s) - volatility (finance) , stock exchange , economics , tick size , compass , econometrics , monetary economics , financial economics , decimal , mathematics , finance , geography , arithmetic , cartography
Recent research suggests that volatility has an important role to play in the appearance of the compass rose pattern. The introduction of decimal prices on the New York Stock Exchange (NYSE) provides an ideal opportunity to test this hypothesis using actual market data. The empirical evidence presented in this paper suggests that the 85 per cent reduction in the tick/volatility ratio resulting from the decimalisation of prices was not sufficient to eliminate the compass rose pattern.