Transactions costs and holding periods for common stocks

Allen B. Atkins, Edward A. Dyl

Research output: Contribution to journalArticle

67 Scopus citations

Abstract

Amihud and Mendelson (1986) and Constantinides (1986) provide a theoretical basis for the proposition that assets with higher transactions costs are held by investors for longer holding periods, and vice versa. We examine average holding periods and bid-ask spreads for Nasdaq stocks from 1983 through 1991 and for New York Stock Exchange (NYSE) stocks from 1975 through 1989 and find strong evidence that, as predicted, the length of investors' holding periods is related to bid-ask spreads. We also find that the relation between holding periods and bid-ask spreads is much stronger on Nasdaq, where spreads are larger, than on the NYSE, where spreads are smaller.

Original languageEnglish (US)
Pages (from-to)309-325
Number of pages17
JournalJournal of Finance
Volume52
Issue number1
DOIs
StatePublished - Mar 1997
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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