This shift to the short term has three causes: First, regulators in many nations have pushed successfully for lower transaction costs most notably through the deregulation of brokerage commissions in the 1970s and 1980s, but also through initiatives such as price decimalization in the late 1990s.
In fact the General Accounting Office noted that trading costs are up, post-decimalization, as much as six to seven basis points per trade.
We use decimalization as an exogenous shock to liquidity to identify causal effects.
That is because decimalization, as professional investors call the changeover, has sharply shrunk the spread on Nasdaq stocks.
In 1981, it was different: plenty of people were still alive who had been born in the reign of Queen Victoria; shillings and florins, left over from before decimalization, still circulated as legal tender.
[Full disclosure: Reuters is an investor in Forbes.com.] Worth nearly $3.5 billion at the IPO, Instinet has watched its market share and market value shrink, as lower trading volumes and decimalization made stock trading a less lucrative business.
In particular, the repeating circle, invented in about 1787 by Borda, himself a strong proponent of decimalization, was adapted to use decimal angles.
Mouton's proposal contained three of the major characteristics of the metric system: decimalization, rational prefixes, and the Earth's measurement as basis for a definition.
We use the decimalization of the US stock exchanges in 2001 as a natural experiment to provide an exogenous shock to liquidity.
And would decimalization make the strains worse? A. The investment community as a whole, including the public, cannot handle decimalization right now.
