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The Next Tick on Nasdaq: Does Level II Information Matter?

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Author Info
Bruce Mizrach () (Rutgers University)

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Abstract

The Nasdaq stock market provides information about buying and selling interest in what is called the Level II display. Using a bivariate VAR model of trades and quotes, I assess the effect of Level II prices and depths on short-run quote dynamics. I also determine the influence of individual market makers and electronic networks and find evidence of strategic behavior. Finally, I produce a set of dynamic market price responses to buy and sell orders, and I find that these estimates vary with standard measures of liquidity.

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Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 200202.

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Date of creation: 07 May 2002
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Handle: RePEc:rut:rutres:200202

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Related research
Keywords: Nasdaq; Level II; microstructure; tick;

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Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. James Weston, 2002. "Electronic Communication Networks and Liquidity on the Nasdaq," Journal of Financial Services Research, Springer, vol. 22(1), pages 125-139, August. [Downloadable!] (restricted)
  2. Hasbrouck, Joel, 1991. " Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March. [Downloadable!] (restricted)
  3. Christie, William G & Schultz, Paul H, 1994. " Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-40, December. [Downloadable!] (restricted)
  4. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
  5. Bruce Mizrach & Yijie Zhang, 2000. "Should ECNs be SOES-able?," Departmental Working Papers 200010, Rutgers University, Department of Economics. [Downloadable!]
  6. Klock, Mark & McCormick, D Timothy, 1999. "The Impact of Market Maker Competition on Nasdaq Spreads," The Financial Review, Eastern Finance Association, vol. 34(4), pages 55-73, November.
  7. Michael J. Barclay & William G. Christie & Jeffrey H. Harris & Eugene Kandel & Paul H. Schultz, 1999. "Effects of Market Reform on the Trading Costs and Depths of Nasdaq Stocks," Journal of Finance, American Finance Association, vol. 54(1), pages 1-34, 02. [Downloadable!] (restricted)
  8. Madhavan, Ananth & Cheng, Minder, 1997. "In Search of Liquidity: Block Trades in the Upstairs and Downstairs Markets," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 10(1), pages 175-203.
  9. G. William Schwert, 2001. "Stock Volatility in the New Millennium: How Wacky Is Nasdaq?," NBER Working Papers 8436, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. James P. Weston, 2000. "Competition on the Nasdaq and the Impact of Recent Market Reforms," Journal of Finance, American Finance Association, vol. 55(6), pages 2565-2598, December. [Downloadable!] (restricted)
  11. Bollerslev, Tim & Domowitz, Ian & Wang, Jianxin, 1997. "Order flow and the bid-ask spread: An empirical probability model of screen-based trading," Journal of Economic Dynamics and Control, Elsevier, vol. 21(8-9), pages 1471-1491, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bruce Mizrach, 2003. "Analyst Recommendations and Nasdaq Market Making Activity," Departmental Working Papers 200307, Rutgers University, Department of Economics. [Downloadable!]
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