Journal of Finance Vol. 49 No. 4 1994
Trading Mechanisms and the Components of the Bid-Ask Spread
Abstract
We compare the relative magnitudes of the components of the bid-ask spread for New York Stock Exchange (NYSE)/American Stock Exchange (AMEX) stocks to those of National Association of Securities Dealers Automated Quotations (NASDAQ)/National Market System (NMS) stocks. We find that the order-processing cost component is smaller, and the adverse selection component is greater on the NYSE/AMEX trading systems than on the NASDAQ/NMS system. The inventory holding component is also greater for exchange-traded stocks than for NASDAQ/NMS stocks, but this may be attributable to differences in the characteristics of the firms whose stocks trade on the respective systems.
- DOI
- 10.2307/2329194
- Volume
- 49
- Issue
- 4
- Pages
- 1471
- Sources
- openalex crossref