SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

Reg SHO Pilot Report DRAFT 9/14/2006
Table 7: Volatility
This table summarizes how volatility changes when the tick and bid tests are removed. The four months prior to the
Pilot start date (May 2, 2005) are called the “Pre-Pilot” period and the six months following the start date are called
the “Pilot” period. The table shows the average change in various volatility measures for pilot and control stocks
and estimates whether the pilot stocks changed more than the control stocks. Daily Price Range is 100*(log high –
log low). Absolute return and standard deviation are reported in percentage points. While standard deviation is
reported, tests were run on variances to avoid Jensen’s inequality. Paired t-tests determine whether the changes are
significant. Tests of the difference between the changes are two-sample t-tests. **, * indicates statistical
significance at the 1 and 5% level in a two-tailed test. We test whether the difference in the change for Listed
Stocks is statistically different from that of Nasdaq NM Stocks using a regression framework. During the Pilot
Period, we run daily cross-sectional regressions of each variable on an indicator for pilot securities and the
variable’s Pre-Pilot level (equation 1). We run the regression separately for Listed and Nasdaq NM Stocks and test
whether the coefficients on the pilot indicator are similar. a, b indicates that the average coefficient for Nasdaq NM
Stocks is statistically different from the average coefficient for Listed Stocks at the 1% and 5% level in a two-tailed
test.
Panel A: Univariate Changes
Pilot Sample Control Sample Pilot Δ
minus
Variable Market Pre- Pilot Δ Pre- Pilot Δ Control Δ
Pilot
Pilot
Daily Price Range Listed 2.45 2.42 -0.03 2.43 2.36 -0.07** 0.04
Daily Price Range Nasdaq 3.64 3.36 -0.28** 3.76 3.41 -0.35** 0.07
Absolute Return – 5m Listed 0.11 0.12 0.00 0.11 0.11 -0.01** 0.01**
Absolute Return – 5m Nasdaq 0.14 0.13 -0.01** 0.15 0.13 -0.02** 0.01**
Absolute Return – 30m Listed 0.29 0.28 -0.01* 0.28 0.27 -0.01** 0.00
Absolute Return – 30m
Absolute Return – day
Absolute Return – day
Nasdaq
Listed
Nasdaq
0.39
1.34
1.80
0.36
1.29
1.69
-0.03**
-0.05**
-0.11**
0.40
1.33
1.85
0.36
1.30
1.71
-0.04**
-0.04**
-0.14**
0.01
-0.01
0.03
Return Standard Deviation – 5m Listed 0.19 0.20 0.00 0.20 0.19 -0.01 0.01
Return Standard Deviation – 5m Nasdaq 0.26 0.25 -0.01 0.27 0.26 -0.01** 0.02
Return Standard Deviation – 30m Listed 0.45 0.44 -0.01 0.44 0.43 -0.01* -0.00
Return Standard Deviation – 30m
Return Standard Deviation – day
Return Standard Deviation – day
Nasdaq
Listed
Nasdaq
0.61
2.11
2.72
0.58
1.97
2.75
-0.03**
-0.14
0.03
0.63
2.00
2.82
0.59
2.03
2.72
-0.04**
0.03
-0.10
0.01
-0.01
-0.13
Variance Ratio 5/30 Listed 1.12 1.23 0.11** 1.11 1.15 0.04** 0.07**
Variance Ratio 5/30 Nasdaq 1.23 1.30 0.06** 1.26 1.29 0.03** 0.03*
Variance Ratio 5/day Listed 3.09 3.30 0.21** 2.98 3.08 0.10 0.11
Variance Ratio 5/day Nasdaq 4.08 4.09 0.01 4.15 4.62 0.47 -0.45
Variance Ratio 30/day Listed 2.71 2.62 -0.08 2.64 2.57 -0.07 0.01
Variance Ratio 30/day Nasdaq 3.24 3.02 -0.22* 3.25 3.28 0.03 -0.25
Prepared by the Office of Economic Analysis 66
DRAFT