%0 Journal Article %A Carl Luft %A Lawrence M. Levine %T Over the Counter Bulletin Board Exchange %B The Impact of Liquidity and Size to Return, Volatility, and Bid/Ask Spread %D 2004 %R 10.3905/jai.2004.461461 %J The Journal of Alternative Investments %P 95-106 %V 7 %N 3 %X This study was motivated by the lack of empirical research performed on securities traded on the over the counter bulletin board exchange (“OTC-BB” or the “Exchange”). It extends prior research on this market by studying the impact of market capitalization and liquidity to return, volatility and components of the bid-ask spread. The time period analyzed runs from January 1, 1996 through December 31, 2000. The authors calculate return, volatility, Sharpe ratio, spread, and turnover for 10 equal-size deciles exclusively using OTC-BB traded securities. They find that an investment strategy that focuses on the largest OTC-BB firms provides relatively the highest risk-return trade-off in this market during the period January 1996? December 2000. These findings are consistent with an earlier article by the authors that suggests that a trading strategy of OTC-BB securities will not yield an appropriate risk-return trade-off as measured by the Sharpe ratio. In addition, they find that competition appears to be increasing as the relative bid/ask spread for OTC-BB securities declines. Finally, they observe that the behavior of the market participants trading OTC-BB securities (“traders”) is consistent with the behavior exhibited by New York Stock Exchange (“NYSE”) specialists. %U https://jai.pm-research.com/content/iijaltinv/7/3/95.full.pdf