| This study analyzes the effects of listing changes within NASDAQ during the period 1998 to 2005. Firms that phased up from the NASDAQ SmallCap to the NASDAQ National Market (NNM) experienced positive excess returns on average before the listing change and zero excess returns after the listing change. Over the period of the listing change, firms that phased up experienced significant declines in bid-ask spreads, the volatility of returns, and the probability of informed trading. Surprisingly, firms that phased down from NNM to SmallCap experienced positive excess returns on average both before and after the listing change. Over the period of the listing change, firms that phased down experienced a decline in bid-ask spreads but insignificant changes in the volatility of returns and the probability of informed trading. Lastly, the effects of phasing up and down are estimated in a simultaneous equations model of bid-ask spreads, return volatility, and trading volume. |
