The Battle of the Stock Exchanges: Are Large Companies Worth More if They List on the NYSE?

The American equity markets are dominated by two exchanges: the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotation System (NASDAQ). While the two exchanges account for about 93 % of all trades in the United States, analysis of exchange market share trends suggest that the NYSE may be in decline relative to the NASDAQ. Nevertheless, variation between the two exchanges and the observation that investors do not have homogenous preferences suggest that the exchange industry is capable of supporting multiple exchanges. To further analyze this claim, this study compares daily volatility and volume across exchanges using two methodologies. While one assay analyzes trading data of individual firms that switch exchanges and the other compares similar firms listed on differing exchanges, both studies yield the unambiguous result that daily volatility is lower on the NYSE and that average turnover rates, as calculated by observed daily volume, are more likely to be lower on the NYSE then on the NASDAQ. Both results suggest that shareholder value is maximized when firms list on the NYSE. While volatility reduces trading costs, lower turnover rates suggest a larger base of long-term investors, who are likely to maximize firm value through sufficient governance. Although low volatility and turnover are only two desirable traits in an exchange, the results of this study imply that the NYSE should have little difficulty in maintaining its revenue base of large-cap firms in the foreseeable future