Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10475158 | Journal of Empirical Finance | 2005 | 23 Pages |
Abstract
In this study we analyze the effect of order imbalance on the quotation behavior of Nasdaq market makers. We find that Nasdaq market makers use both price and quantity quotes when dealing with order imbalances. However, order imbalance affects only price movement, not spreads. We also find that Nasdaq market makers quote more shares and compete more intensively on bid-side (ask-side) when public sells (buys) exceed public buys (sells). These suggest that market makers increase liquidity supply when order imbalances exist. More interestingly, we show that both market conditions and price movements affect investors' trading behavior.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Mingsheng Li, Timothy McCormick, Xin Zhao,