Did Decimalization Benefit Members of the Toronto Stock Exchange?
Quarterly Journal of Business and Economics, Vol. 45, No. 3/4 (Summer - Autumn, 2006), pp. 49-67
University of Alberta School of Business Research Paper No. 2013-220
Posted: 24 May 2013 Last revised: 30 May 2013
Date Written: October 23, 2005
Abstract
We examine the impact of adopting decimal price quotes on the welfare of members of the Toronto Stock Exchange (TSX) based on a multivariate analysis of seat prices. Consistent with existing studies, we find that decimalization leads to lower bid-ask spreads as well as lower quoted depths. To see if the combined effect of these changes benefited TSX members, we examine changes in the TSX's market share and total trading volume of interlisted stocks. In addition, we measure the wealth effect of decimalization on the TSX members using a multivariate analysis of seat prices. Our results suggest that TSX members anticipated positive benefits from decimalization, and that the switch to decimal prices had not adversely affected them.
Suggested Citation: Suggested Citation
Mark R. Huson
University of Alberta - Department of Finance and Statistical Analysis ( email )
4-20C Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2803 (Phone)
780-492-3325 (Fax)
Vikas Mehrotra (Contact Author)
University of Alberta - Department of Finance and Statistical Analysis ( email )
School of Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2976 (Phone)
780-492-3325 (Fax)