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Price And Quantity Quotes On Nasdaq: A Study Of Dealer Quotation Behavior


  • Kee H. Chung
  • Xin Zhao


We show that the majority of quotes posted by NASDAQ dealers are noncompetitive and only 19.5% (18.4%) of bid (ask) quotes are at the inside. The percentage of dealer quotes that are at the inside is higher for stocks with wider spreads, fewer market makers, and more frequent trading, and lower for stocks with larger trade sizes and higher return volatility. These results support our conjecture that dealers have greater incentives to be at the inside for stocks with larger market-making revenues and smaller costs. Dealers post large depths when their quotes are at the inside and frequently quote the minimum required depth when they are not at the inside. The latter quotation behavior leads to the negative intertemporal correlation between dealer spread and depth. 2004 The Southern Finance Association and the Southwestern Finance Association.

Suggested Citation

  • Kee H. Chung & Xin Zhao, 2004. "Price And Quantity Quotes On Nasdaq: A Study Of Dealer Quotation Behavior," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 27(4), pages 497-519.
  • Handle: RePEc:bla:jfnres:v:27:y:2004:i:4:p:497-519

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    References listed on IDEAS

    1. Kenneth A. Kavajecz, "undated". "A Specialist's Quoted Depth as a Strategic Choice Variable," Rodney L. White Center for Financial Research Working Papers 12-96, Wharton School Rodney L. White Center for Financial Research.
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    1. repec:bla:jfnres:v:39:y:2016:i:4:p:411-436 is not listed on IDEAS
    2. Bruce Mizrach, 2008. "The next tick on Nasdaq," Quantitative Finance, Taylor & Francis Journals, vol. 8(1), pages 19-40.
    3. Jared F. Egginton & Bonnie F. Ness & Robert A. Ness, 2016. "Dealers and changing obligations: the case of stub quoting," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 919-941, November.
    4. Chung, Kee H. & Chuwonganant, Chairat, 2007. "Quote-based competition, market share, and execution quality in NASDAQ-listed securities," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2770-2795, September.

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