References
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Table 1
Descriptive statistics for 482 matched pairs of Nasdaq-listed and NYSE-listed stocks
To obtain a matched sample of Nasdaq and NYSE stocks, we first calculate the following composite match score (CMS) for each Nasdaq stock in our sample against each of 2,912 NYSE stocks in the TAQ database: CMS = [(YkN - YkY)/{(YkN + YkY)/2}]2, where Yk represents one of the four stock attributes, superscripts, N and Y, refer to Nasdaq and NYSE, respectively, and denotes the summation over k = 1 to 4. For each Nasdaq stock, we pick the NYSE stock with the smallest score. We include in the study sample only those pairs (482 pairs) with a composite match score of less than three. We measure share price by the mean value of the midpoints of quoted bid and ask prices, and trade size by the average dollar transaction during the study period. The number of trades is the total number of transactions during the study period. We measure return volatility by the standard deviation of daily returns calculated from the daily closing midpoints of bid and ask prices.
|
Variable
|
Exchange
|
Mean
|
Standard
Deviation
|
Percentile
| |
Min
|
25
|
50
|
75
|
Max
| |
Share Price
($)
Number of Trades
Trade Size
($)
Return Volatility
|
Nasdaq
NYSE
Nasdaq
NYSE
Nasdaq
NYSE
Nasdaq
NYSE
|
29.92
30.02
20643
19066
41707
44982
0.0319
0.0284
|
18.43
18.20
31328
31539
27045
26962
0.0144
0.0117
|
2.03
1.77
437
359
3902
3945
0.0008
0.0014
|
15.24
15.53
5395
4668
20941
23386
0.0226
0.0204
|
26.87
28.05
10326
8875
37632
41828
0.0292
0.0263
|
41.42
40.71
20918
18905
56922
62130
0.0383
0.0339
|
129.85
101.31
267142
336715
207165
130616
0.0913
0.0841
|
Table 2
The quality of the sample match
To assess the quality of our matched sample, we use two regression models. First, we regress measures of execution costs against the four stock attributes using our sample of Nasdaq stocks and the matched sample of NYSE stocks. We use three measures of execution costs: the quoted spread, effective spread, and realized spread. The quoted spread is calculated as (Ait - Bit)/Mit, where Ait is the posted ask price for stock i at time t, Bit is the posted bid price for stock i at time t, and Mit is the mean of Ait and Bit. The effective spread measures the execution cost actually paid by the trader. The realized spread measures price reversals after trades. For each stock, we calculate the average quoted, effective, and realized spreads using all the time-series observations during the three-month study period and then use these averages in the regressions. We use the reciprocal of share price, number of trades, and trade size in the regressions. The results from these regressions help us assess whether the four stock attributes are important determinants of the cross-sectional variation in spreads for our sample of stocks. Second, we perform regression analysis using differences in the variables (i.e., spreads and four stock attributes) between our Nasdaq and NYSE stocks to determine whether there exists any difference in spreads between our Nasdaq and NYSE stocks, after controlling for their differences in share price, number of trades, trade size, and risk. We measure share price by the mean value of the midpoints of quoted bid and ask prices, and trade size by the average dollar transaction during the study period. The number of trades is the total number of transactions during the study period. We measure return volatility by the standard deviation of daily returns calculated from the daily closing midpoints of bid and ask prices. Absolute values of White's (1980) t-statistics are reported in parentheses.
|
Independent Variable
|
Quoted Spread
|
Effective Spread
|
Realized Spread
| |
Nasdaq
|
NYSE
|
Nasdaq - NYSE
|
Nasdaq
|
NYSE
|
Nasdaq - NYSE
|
Nasdaq
|
NYSE
|
Nasdaq - NYSE
| |
Intercept
1/(Share Price)
1/(Number of Trades)
1/(Trade Size)
Return Volatility
Adjusted R2
F-value
|
0.0024
(5.05**)
0.0325
(3.85**)
9.0337
(11.24**)
48.0834
(3.68**)
0.0629
(4.54**)
0.5736
162.76**
|
-0.0002
-0.93
0.0505
(18.67**)
4.9110
(12.96**)
65.505
(14.20**)
0.0455
(5.79**)
0.9094
1207.37**
|
0.0025
(12.00**)
-0.0001
(1.31)
-0.0001
(1.82)
0.0001
(0.55)
0.0037
(0.14)
0.0024
1.29
|
0.0019
(6.04**)
0.0224
(4.04**)
5.3361
(10.08**)
54.4785
(6.32**)
0.0385
(4.21**)
0.6826
259.62**
|
-0.0005
(3.46**)
0.0442
(29.10**)
2.8764
(13.49**)
36.6963
(13.93**)
0.0508
(11.49**)
0.9465
2127.47**
|
0.0022
(15.62**)
-0.0001
(1.82)
-0.001
(1.15)
0.0001
(1.18)
0.0038
(0.21)
0.0029
1.35
|
0.002
(6.45**)
0.0237
(4.44**)
5.2325
(10.26**)
46.0141
(5.55**)
0.0378
(4.30**)
0.6698
244.95**
|
-0.0003
(3.14**) 0.0447
(38.39**)
1.9038
(11.67**)
28.164
(13.98**)
0.0237
(7.02**)
0.9605
2928.65**
|
0.003
(22.10**)
-0.0001
(1.54)
-0.0001
(1.16)
0.0001
(1.37)
0.0067
(0.38)
0.002
1.24
|
*Significant at the 5% level.
**Significant at the 1% level.
|
Table 3
Comparison of spreads between Nasdaq stocks and NYSE stocks
This table reports the average Nasdaq and NYSE spreads for our whole sample and for each quartile based on share price, number of trades, trade size, and return volatility. The quoted spread is calculated as (Ait – Bit)/Mit, where Ait is the posted ask price for stock i at time t, Bit is the posted bid price for stock i at time t, and Mit is the mean of Ait and Bit. The effective spread measures the percentage execution costs actually paid by the trader. The realized spread measures price reversals after trades. The table also reports the results of paired comparison t-tests for Nasdaq spread and NYSE spread. The tests show whether the mean difference is significantly different from zero. We measure share price by the mean value of the midpoints of quoted bid and ask prices, and trade size by the average dollar transaction during the study period. The number of trades is the total number of transactions during the study period. We measure return volatility by the standard deviation of daily returns calculated from the daily closing midpoints of bid and ask prices. All numbers are in percentages (i.e., 0.014891 is reported as 1.4891).
|
Quartile based on
|
|
Quoted Spread
|
Effective Spread
|
Realized Spread
|
Nasdaq Spread
|
NYSE Spread
|
Nasdaq – NYSE
|
t-stat
|
NASDAQ Spread
|
NYSE Spread
|
Nasdaq - NYSE
|
t-stat
|
Nasdaq Spread
|
NYSE Spread
|
Nasdaq - NYSE
|
t-stat
| |
Share Price
|
Q1
Q2
Q3
Q4
|
1.4891
0.9460
0.7731
0.6453
|
1.4115
0.6617
0.4727
0.3418
|
0.0776
0.2842
0.3004
0.3035
|
1.444
9.854**
13.139**
11.485**
|
1.2029
0.7230
0.5757
0.4727
|
1.0495
0.4869
0.3407
0.2543
|
0.1534
0.2361
0.2350
0.2185
|
4.316**
10.597**
15.533**
12.101**
|
1.1534
0.7051
0.5609
0.4556
|
0.8765
0.3782
0.2610
0.1830
|
0.2769
0.3269
0.3000
0.2726
|
7.707**
15.676**
19.919**
16.054**
| |
Number of Trades
|
Q1
Q2
Q3
Q4
|
1.4884
1.058
0.8194
0.4874
|
1.0137
0.7933
0.6847
0.3977
|
0.4748
0.2648
0.1347
0.0897
|
10.426**
7.963**
3.940**
7.380**
|
1.0840
0.8054
0.6632
0.4219
|
0.6912
0.5847
0.5189
0.3380
|
0.3928
0.2207
0.1443
0.0839
|
12.843**
10.880**
7.087**
7.098**
|
1.0450
0.7863
0.6404
0.4036
|
0.5548
0.4775
0.4154
0.2524
|
0.4901
0.3089
0.2249
0.1512
|
16.113**
16.081**
11.978**
17.622**
| |
Trade Size
|
Q1
Q2
Q3
Q4
|
1.5112
0.9209
0.7326
0.6890
|
1.4070
0.6572
0.4329
0.3910
|
0.1042
0.2637
0.2997
0.2980
|
1.917
9.557**
13.059**
10.643**
|
1.2271
0.7123
0.5457
0.4893
|
1.0469
0.4825
0.3205
0.2818
|
0.1802
0.2298
0.2252
0.2075
|
4.955**
11.252**
15.587**
10.500**
|
1.1734
0.6912
0.5323
0.4783
|
0.8695
0.3840
0.2413
0.2042
|
0.3039
0.3072
0.2909
0.2742
|
8.340**
15.273**
19.754**
15.801**
| |
Return Volatility
|
Q1
Q2
Q3
Q4
|
0.7499
0.9076
0.9834
1.2170
|
0.4786
0.6499
0.7328
1.0321
|
0.2713
0.2577
0.2507
0.1849
|
11.351**
6.903**
8.192**
3.822**
|
0.5482
0.6980
0.7683
0.9636
|
0.3325
0.4716
0.5381
0.7935
|
0.2157
0.2264
0.2302
0.1701
|
14.712**
9.097**
9.825**
5.483**
|
0.5342
0.6803
0.7412
0.9230
|
0.2648
0.3778
0.4213
0.6387
|
0.2694
0.3025
0.3200
0.2844
|
17.578**
12.223**
13.790**
9.637**
| |
Whole Sample
|
0.9641
|
0.7228
|
0.2412
|
13.345**
|
0.7442
|
0.5335
|
0.2107
|
17.407**
|
0.7193
|
0.4253
|
0.2941
|
24.805**
|
Significant at the 5% level.
**Significant at the 1% level.
|
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