The tick/volatility ratio as a determinant of the compass rose

Empirical evidence from decimalisation on the NYSE

Michael D. McKenzie, Alex Frino

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)331-344
Number of pages14
JournalAccounting and Finance
Volume43
Issue number3
DOIs
Publication statusPublished - Nov 2003

Keywords

  • Compass rose pattern
  • Decimalisation
  • Empirical evidence
  • Tick/volatility ratio

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