The tick/volatility ratio as a determinant of the compass rose: empirical evidence from decimalisation on the NYSE |
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Authors: | Michael D McKenzie Alex Frino |
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Institution: | School of Economics and Finance, RMIT University, Melbourne, Australia;Department of Finance, University of Sydney, Australia |
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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. |
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Keywords: | Compass rose pattern Decimalisation Empirical evidence Tick/volatility ratio |
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