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Analyst Recommendations and Nasdaq Market Making Activity


  • Bruce Mizrach

    () (Rutgers University)


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.

Suggested Citation

  • Bruce Mizrach, 2003. "Analyst Recommendations and Nasdaq Market Making Activity," Departmental Working Papers 200307, Rutgers University, Department of Economics.
  • Handle: RePEc:rut:rutres:200307

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    References listed on IDEAS

    1. 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.
    2. Schultz, Paul, 2003. "Who makes markets," Journal of Financial Markets, Elsevier, vol. 6(1), pages 49-72, January.
    3. Bruce Mizrach & Yijie Zhang, 2000. "Should ECNs be SOES-able?," Departmental Working Papers 200010, Rutgers University, Department of Economics.
    4. Reena Aggarwal & Pat Conroy, 2000. "Price Discovery in Initial Public Offerings and the Role of the Lead Underwriter," Journal of Finance, American Finance Association, vol. 55(6), pages 2903-2922, December.
    5. Michaely, Roni & Womack, Kent L, 1999. "Conflict of Interest and the Credibility of Underwriter Analyst Recommendations," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 653-686.
    6. Bruce Mizrach, 2002. "The Next Tick on Nasdaq: Does Level II Information Matter?," Departmental Working Papers 200202, Rutgers University, Department of Economics.
    7. Yusif Simaan & Daniel G. Weaver & David K. Whitcomb, 2003. "Market Maker Quotation Behavior and Pretrade Transparency," Journal of Finance, American Finance Association, vol. 58(3), pages 1247-1268, June.
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    Cited by:

    1. Jie Lu & Bruce Mizrach, 2007. "Is Talk Cheap Online: Strategic Interaction in A Stock Trading Chat Room," Departmental Working Papers 200701, Rutgers University, Department of Economics.

    More about this item


    Nasdaq; analyst; market maker;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage


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