Using matched samples to test for differences in trade execution costs

Centralised order books versus hybrid order books: A paired comparison of trading costs on NSC (Euronext Paris) and SETS (London Stock Exchange)

“…8 The free float of a security is equal to its market capitalisation minus cross-participations of 5% or more held by public organisations or individuals. As shown in Davies et al (2004), using market capitalisation as a matching characteristic provides a strong testing power and we believe that free float is even more relevant for liquidity comparison. sector were considered.…”

One-to-many matching: An alternative trading cost comparison technique

“…Having two mismatched sample pools is likely to occur and that would cause difficulties for the matching technique. Davies and Kim (2008) discuss matching techniques using Monte Carlo simulation and reach a series of conclusions based on their sample pool of 1000 NYSE-list stocks. In their simulation, both the 50 treatment stocks and the 950 control stocks are from the 1000 NYSE stock pool and therefore have identical firm characteristics.…”

“…This is in sharp contrast to what is done in Davies and Kim (2008). Unless the sample size is really large and there are many more stocks in the control sample than in the treatment Table 4 Comparison of alternative matching procedures: large NASDAQ stocks with mixed NYSE stocks.…”

“…Our discussion is related to the recent work of Davies and Kim Davies and Kim (2008). They use Monte Carlo simulation to provide many insights on different matching methods.…”

The Impact of Market Structure on Ex‐Dividend Day Stock Price Behavior

“…As NYSE bid-ask spread data are available in CRSP only from 1993 onward, the matched sample spans 1993 to 2014. Following Huang and Stoll (1996) and Davies and Kim (2009), we do not impose a tolerance level on the CMS. Finally, for each NASDAQ observation we pick the NYSE observation with the smallest CMS.…”