Anything wrong with breaking a buck? An empirical evaluation of NASDAQ's $1 minimum bid price maintenance criterion

S. Ghon Rhee; Feng Wu

doi:10.1016/j.finmar.2011.09.002

Anything wrong with breaking a buck? An empirical evaluation of NASDAQ's $1 minimum bid price maintenance criterion

S. Ghon Rhee, Feng Wu

Research output: Journal article publication › Journal article › Academic research › peer-review

2 Citations (Scopus)

Abstract

This paper empirically evaluates the effects of NASDAQ's $1 minimum bid price threshold (known as the one-dollar rule) as part of its listing maintenance criteria. Even though this controversial rule was introduced as early as September 1991, its economic impact has been largely unexplored by academics. This study suggests that implementation of the one-dollar rule is justified for the following reasons: (1) NASDAQ stocks frequently trading below $1 during the pre-rule period are extremely vulnerable to catastrophic losses; (2) a dramatic decline in extreme loss probability is observed among low-priced (relative to $1) stocks after the rule was introduced; and (3) the $1 benchmark serves as an appropriate cutoff point in screening stocks listed on the exchange.

Original language	English
Pages (from-to)	258-285
Number of pages	28
Journal	Journal of Financial Markets
Volume	15
Issue number	2
DOIs	https://doi.org/10.1016/j.finmar.2011.09.002
Publication status	Published - 1 May 2012
Externally published	Yes

Keywords

Exchange listing standards
Extreme tail risk
Low-priced stocks
NASDAQ

ASJC Scopus subject areas

Finance
Economics and Econometrics

More information

10.1016/j.finmar.2011.09.002

Cite this

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Anything wrong with breaking a buck? An empirical evaluation of NASDAQ's $1 minimum bid price maintenance criterion

Abstract

Keywords

ASJC Scopus subject areas

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