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The Trades of Market Makers: An Empirical Analysis of NYSE Specialists

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Author Info
 Hasabrouck, Joel
Sofianos, George
Abstract

This paper presents a transaction-level empirical analysis of the trading activities of New York Stock Exchange specialists. The main findings of the analysis are the following: adjustment lags in inventories vary across stocks and are in some cases as long as one or two months; decomposition of specialist trading profits by trading horizon shows that the principal source of these profits is short term; an analysis of the dynamic relations among inventories, signed order flow, and quote changes suggests that trades in which the specialist participates have a higher immediate impact on the quotes than trades with no specialist participation. Copyright 1993 by American Finance Association.

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Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 48 (1993)
Issue (Month): 5 (December)
Pages: 1565-93
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Handle: RePEc:bla:jfinan:v:48:y:1993:i:5:p:1565-93

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  1. Geir Hoidal Bjonnes & Dagfinn Rime, 2003. "Dealer Behavior and Trading Systems in Foreign Exchange Markets," Working Paper 2003/10, Norges Bank. [Downloadable!]
    Other versions:
  2. Erik Theissen, 2002. "Trader Anonymity, Price Formation and Liquidity," Bonn Econ Discussion Papers bgse20_2002, University of Bonn, Germany. [Downloadable!]
  3. Albert J. Menkveld & Siem Jan Koopman & André Lucas, 2003. "Round-the-Clock Price Discovery for Cross-Listed Stocks: US-Dutch Evidence," Tinbergen Institute Discussion Papers 03-037/2, Tinbergen Institute, revised 13 Oct 2003. [Downloadable!]
  4. Bardong, Florian & Bartram, Söhnke M. & Yadav, Pradeep K., 2007. "Are Short-sellers Different?," MPRA Paper 13585, University Library of Munich, Germany, revised 16 Nov 2008. [Downloadable!]
  5. Bardong, Florian & Bartram, Söhnke M. & Yadav, Pradeep K., 2005. "Informed Trading, Information Asymmetry and Pricing of Information Risk: Empirical Evidence from the NYSE," MPRA Paper 13586, University Library of Munich, Germany, revised 10 Oct 2008. [Downloadable!]
  6. Hau, Harald, 1999. "Information and Geography: Evidence from the German Stock Market," CEPR Discussion Papers 2297, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Fagan, Stephen & Gencay, Ramazan, 2008. "Liquidity-Induced Dynamics in Futures Markets," MPRA Paper 6677, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  8. Dunne, Peter & Hau, Harald & Moore, Michael, 2008. "A Tale of Two Platforms: Dealer Intermediation in the European Sovereign Bond Market," CEPR Discussion Papers 6969, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Michael J. Fleming & Joshua V. Rosenberg, 2007. "How do treasury dealers manage their positions?," Staff Reports 299, Federal Reserve Bank of New York. [Downloadable!]
  10. Chris D'Souza, 2002. "A Market Microstructure Analysis of Foreign Exchange Intervention in Canada," Working Papers 02-16, Bank of Canada. [Downloadable!]
  11. Karl Friedrich Habermeier & Andrei Kirilenko, . "Securities Transaction Taxes and Financial Markets," IMF Working Papers 01/51, International Monetary Fund. [Downloadable!]
  12. Jose Montalvo, 2003. "Liquidity and market makers: a pseudo-experimental analysis with ultrahigh frequency data," European Journal of Finance, Taylor and Francis Journals, vol. 9(4), pages 358-378, August. [Downloadable!] (restricted)
  13. Osler, Carol & Mende, Alexander & Menkhoff, Lukas, 2006. "Price Discovery in Currency Markets," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-351, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  14. Pu Shen & Ross M. Starr, 2000. "Market makers' supply and pricing of financial market liquidity," Research Working Paper RWP 00-03, Federal Reserve Bank of Kansas City. [Downloadable!]
  15. Bardong, Florian & Bartram, Söhnke M. & Yadav, Pradeep K., 2006. "The Effect of Corporate Break-ups on Information Asymmetry: A Market Microstructure Analysis," MPRA Paper 13155, University Library of Munich, Germany, revised 26 Oct 2008. [Downloadable!]
  16. Thomas Gehrig & Matthew Jackson, 1994. "Bid-Ask Spreads with Indirect Competition Among Specialists," Discussion Papers 1107, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  17. Ken Nyholm, 2003. "Inferring the private information content of trades: a regime-switching approach

    The views presented in the paper are not necessarily shared by," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 457-470. [Downloadable!]

  18. Pu Shen & Ross Starr, 2000. "Market Makers' Supply and Pricing of Financial Market Liquidity," University of California at San Diego, Economics Working Paper Series 2000-28, Department of Economics, UC San Diego. [Downloadable!]
  19. Ron Kaniel & Hong Liu, . "Are Transactions and Market Orders More Important than Limit Orders in the Quote Updating Process?," Rodney L. White Center for Financial Research Working Papers 16-98, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
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