Nyse decimalization: the impact on holding periods

Abstract

The recent decrease in average stock holding periods has drawn growing attention from market participants. As empirical studies provide evidence of narrower bid-ask spreads and transaction costs after the decimalization, it begs the question of whether the reduction of tick sizes has, in fact, decreased the holding period of stocks. Using data from 2,601 NYSE-listed stocks, we investigate the impact of the decimalization on the holding period of common stocks by institutional investors. The results show that after the decimalization, holding periods are shorter, as investors trade 78.9 percent more frequently than before.