Do investors prefer even-eighth prices? Evidence from NYSE limit orders

John W. Cooney, Bonnie Van Ness, Robert Van Ness

Research output: Contribution to journalArticlepeer-review

24 Scopus citations

Abstract

Using a large sample of limit orders on NYSE stocks, we find that investors submit more limit orders with even-eighth prices than odd-eight prices. However, even though there are a greater number of even-eighth limit orders, the proportion of executing limit orders submitted with even prices is greater than those submitted with odd prices for a large portion of our sample. We find that clustering on even prices is a positive function of stock price and various proxies for the dispersion in investors' reservation prices. The preference for even prices affects stock quotes: Investors are more likely to submit a quote improving limit order if the limit price is even and quoted depth is higher for even quotes than for odd quotes.

Original languageEnglish
Pages (from-to)719-748
Number of pages30
JournalJournal of Banking and Finance
Volume27
Issue number4
DOIs
StatePublished - Apr 1 2003

Keywords

  • Even-eighth
  • Limit orders
  • Price clustering
  • Quotes
  • Round numbers

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