its assets can affect investment, financing, and dividend
policy.Ingeneral,firmswithlessliquidassetsandsecurities
willtendtobemoreconservativewhenitcomestoinvesting
in long-term projects and paying dividends.
1 ThiswasproposedinTreynor’sarticletitled“WhatDoesIt
TaketoWintheTradingGame?”publishedintheFinancial
Analysts Journal, January–February 1981.
2 SeeNYSE FactBookforalistingoftheaveragespread
across all NYSE stocks, by month.
3 See Thomas Loeb, “Trading Costs: The Critical Link
between Investment Information and Results,” Financial
Analysts Journal(May/June 1983).
4 R.HuangandH.R.Sroll,“TheComponentsoftheBid-Ask
Spread:AGeneralApproach,”ReviewofFinancialStudies
10 (1987): 995–1034.
5 See“TradingCostsandtheTradingSystemsforNASDAQ
Stocks”byM.KothareandP.A.LauxinFinancialAnalysts
Journal(March/April 1995).
6 See“CompetitionandthePricingofDealerServiceinthe
Over-the-CounterMarket”byS.TinicandR.WestinJournal
of Financial and Quantitative Analysis (June 1972), “The
PricingofSecurityDealerServices:AnEmpiricalAnalysisof
NASDAQ Stocks” by H. Stoll in Journal of Finance
(November1978),and“LiquidityEffectsoftheIntroduction
oftheS&P 500 FuturesContractontheUnderlyingStocks”
by N. Jegadeesh and A. Subrah-manyam, in Journal of
Business66 (April 1993): 171–187.