Have capital market anomalies attenuated in the recent era of high liquidity and trading activity?

Have capital market anomalies attenuated in the recent era of high liquidity and trading activity? 1 Introduction</h5> Recent years have witnessed a sea change in trading technologies and the costs of transacting in capital markets. Chakravarty et al. (2005) and French (2008) document the significant decline in institutional commissions. Technology has facilitated algorithmic trading ( Hendershott et al., 2011 ) and hedge funds have proliferated. The improvements in trading technology and liquidity are dramatic and quite unprecedented. 1 1 In its more than 200 year history, the New York Stock Exchange (NYSE) has reduced the tick size only twice: from 8th to 16th in June 1997 and from 16th to penny in January 2001. Technological improvements have allowed the NYSE to accommodate a dramatic increase in trading volumes. Jones (2002) and Chordia et al. (2001) show that standard measures of illiquidity such as bid-ask spreads have decreased substantially over time. Chordia, Roll and Subrahmanyam (CRS) (2011) show that these phenomena have been accompanied by an explosion in trading volume; the monthly, value-weighted average share turnover on the NYSE increased from 5% in 1993 to 35% in 2008, whereas it was virtually unchanged in the 1970s and 1980s. CRS also present evidence that it is institutional trading volume that accounts for this increase and http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Have capital market anomalies attenuated in the recent era of high liquidity and trading activity?

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Publisher
Elsevier
Copyright
Copyright © 2014 Elsevier B.V.
ISSN
0165-4101
D.O.I.
10.1016/j.jacceco.2014.06.001
Publisher site
See Article on Publisher Site

Abstract

1 Introduction</h5> Recent years have witnessed a sea change in trading technologies and the costs of transacting in capital markets. Chakravarty et al. (2005) and French (2008) document the significant decline in institutional commissions. Technology has facilitated algorithmic trading ( Hendershott et al., 2011 ) and hedge funds have proliferated. The improvements in trading technology and liquidity are dramatic and quite unprecedented. 1 1 In its more than 200 year history, the New York Stock Exchange (NYSE) has reduced the tick size only twice: from 8th to 16th in June 1997 and from 16th to penny in January 2001. Technological improvements have allowed the NYSE to accommodate a dramatic increase in trading volumes. Jones (2002) and Chordia et al. (2001) show that standard measures of illiquidity such as bid-ask spreads have decreased substantially over time. Chordia, Roll and Subrahmanyam (CRS) (2011) show that these phenomena have been accompanied by an explosion in trading volume; the monthly, value-weighted average share turnover on the NYSE increased from 5% in 1993 to 35% in 2008, whereas it was virtually unchanged in the 1970s and 1980s. CRS also present evidence that it is institutional trading volume that accounts for this increase and

Journal

Journal of Accounting and EconomicsElsevier

Published: Aug 1, 2014

References

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