Analyst Recommendations and Nasdaq Market Making Activity
I investigate the linkage between liquidity provision by Nasdaq market makers and analysts in the same firm. Using three measures of market activity, I find that Nasdaq firms are more likely to provide buy side liquidity in anticipation of upgrades in the period 1999-2000. ECN activity supports this pattern. Firm level evidence shows that 15 of 42 market makers studied engage in significant pre-recommendation activity. I estimate cumulative abnormal returns of more than 75% and profits of almost $600 million in a sample of 47 large capitalization stocks.
|Date of creation:||10 Aug 2003|
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- Schultz, Paul, 2003. "Who makes markets," Journal of Financial Markets, Elsevier, vol. 6(1), pages 49-72, January.
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- Bruce Mizrach, 2002. "The Next Tick on Nasdaq: Does Level II Information Matter?," Departmental Working Papers 200202, Rutgers University, Department of Economics.
- Warren Bailey & Haitao Li & Connie X. Mao & Rui Zhong, 2003. "Regulation Fair Disclosure and Earnings Information: Market, Analyst, and Corporate Responses," Journal of Finance, American Finance Association, vol. 58(6), pages 2487-2514, December.
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