The Market for Small-Cap Stocks (NYSE MKT)

Abstract

Venture exchanges are currently perceived by the U.S. Securities and Exchange Commission as a possible solution to the liquidity problem of small-cap stocks. This article assesses liquidity on the NYSE MKT, a market for small-cap stocks. We find that both the quoted spread and the relative quoted spread of the stocks listed on the NYSE MKT are higher than their matched peers on the NYSE. Compared with NASDAQ stocks, we find that the NYSE MKT stocks have a higher quoted spread but a lower relative quoted spread. Our event study shows that when stocks switch their listing from the NYSE MKT to the NYSE, they experience a liquidity improvement in terms of the quoted spread and relative quoted spread. However, the evidence on the liquidity changes when stocks switch to NASDAQ is mixed.

TOPICS: Exchanges/markets/clearinghouses, security analysis and valuation