Conrad is from Kenan-Flagler Business School, the University of North Carolina, and Conroy is from Colgate Darden Graduate School of Business, the University of Virginia. We thank the editor, an anonymous referee, and seminar participants at the University of Virginia for their helpful comments. Any remaining errors are our responsibility.
Market Microstructure and the Ex-Date Return
Article first published online: 30 APR 2012
1994 The American Finance Association
The Journal of Finance
Volume 49, Issue 4, pages 1507–1519, September 1994
How to Cite
CONRAD, J. S. and CONROY, R. (1994), Market Microstructure and the Ex-Date Return. The Journal of Finance, 49: 1507–1519. doi: 10.1111/j.1540-6261.1994.tb02464.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This article examines the role of measurement biases, due to order flow effects, in abnormal split ex-day returns. We conjecture that postsplit orders consist of numerous small buyers and fewer larger sellers. This change in order flow causes closing prices to occur more frequently at the ask price, consistent with Maloney and Mulherin (1992) and Grinblatt and Keim (1991). In addition, this change causes specialists' spreads to increase, perhaps to offset larger average inventories. We examine both NYSE and NASDAQ samples and find that order flow biases can explain approximately 80 percent (48 percent) of the NYSE (NASDAQ) ex-day return.