The degree of price resolution and equity trading costs

Research output: Contribution to journalArticlepeer-review

46 Scopus citations


This paper investigates relations between trade execution costs and price-rounding practices for NYSE- and Nasdaq-listed firms. Execution costs on each exchange vary positively with the proportion of transaction prices and quotations rounded to even- eighths of a dollar, both cross-sectionally and intertemporally. After allowing for variation in market-making costs attributable to the private information content of trades, there is a strong positive relation between execution costs and price-rounding frequencies for Nasdaq issues but not for NYSE issues. These findings are consistent with the assertion that price-rounding conventions effectively increase trade execution costs on Nasdaq.

Original languageEnglish (US)
Pages (from-to)9-34
Number of pages26
JournalJournal of Financial Economics
Issue number1
StatePublished - Jul 1997


  • Nasdaq market
  • Quote rounding
  • Trading costs

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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