FIN 340 Ch 3

Which one of the following types of markets requires the greatest level of trading activity to be cost-effective?

Broker market

Dealer market

Continuous auction market

Direct search market

When matching orders from the public, a specialist is required to use the _______.

Lowest outstanding bid price and highest outstanding ask price

Highest outstanding bid price and highest outstanding ask price

Highest outstanding bid price and lowest outstanding ask price

Lowest outstanding bid price and lowest outstanding ask price

According to multiple studies by Ritter, initial public offerings tend to exhibit __________ performance initially and __________ performance over the long term.

Bad; good

Bad; bad

Good; good

Good; bad

More than _______ of all trading is believed to be initiated by computer algorithms.

40%

50%

25%

75%

The term inside quotes refers to _______.

The difference between the lowest bid price and the highest ask price in the limit order book.

The difference between the lowest bid price and the lowest ask price in the limit order book.

The difference between the highest bid price and the lowest ask price in the limit order book.

The difference between the highest bid price and the highest ask price in the limit order book.

What happened to the effective spread on trades when the SEC allowed the minimum tick size to move from one-eighth of a dollar to one-sixteenth of a dollar in 1997 and from one-sixteenth of a dollar to one cent in 2001?

The effective spread increased in both cases.

The effective spread increased in 1997 but decreased in 2001.

The effective spread decreased in both cases.

The effective spread decreased in 1997 but increased in 2001.

Where would an illiquid security in a developing country most likely trade?

Electronic limit-order markets

Broker markets

Electronic crossing networks

FIN 340 Ch 3

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