We analyze data provided by NASDAQ to examine how quote aggressiveness affects dealer market share and whether the practice of internalization mitigates the impact of quote aggressiveness. Our empirical results show that although internalization does not reduce the impact of price aggressiveness...

In this study we show that both the price impact of trades and serial correlation in trade direction are positively and significantly related to the probability of information-based trading (PIN). The positive relation remains significant even after controlling for the effects of stock...

In this paper we analyze the interrelatedness of security analysis and market-making activities. Our results indicate that there exists a bi-directional and positive relation between analyst following and the number of market makers. Using detailed data on analyst and dealer affiliations, we...

Despite the widely held belief that order preferencing affects market quality, no hard evidence exists on the extent and determinants of order preferencing and its impact on dealer competition and execution quality. This study shows that the bid-ask spread (dealer quote aggressiveness) is...

We examine the role of limit-order traders and specialists in the market-making process. We find that a large portion of posted bid-ask quotes originates from the limit-order book without direct participation by specialists, and that competition between traders and specialists has a significant...

In this paper we analyze the interrelatedness of security analysis and market-making activities. Our results indicate that there exists a bi-directional and positive relation between analyst following and the number of market makers. Using detailed data on analyst and dealer affiliations, we...

This study compares the components of the bid-ask spread estimated from quotes that reflect the trading interest of specialists with those estimated from limit-order quotes and all available quotes for a sample of NYSE stocks. The results show that the adverse selection component of the spread...

Despite the widely held belief that order preferencing affects market quality, no hard evidence exists on the extent and determinants of order preferencing and its impact on dealer competition and execution quality. This study shows that the bid-ask spread (dealer quote aggressiveness) is...

Prior studies offer various empirical models to decompose the observed bid-ask spread into the adverse-selection and transitory (order-processing and inventory-holding) components. There is limited evidence, however, on whether the spread components estimated from these models indeed measure...

This study shows that limit-order traders play a significant role in the market-making process. We find that the majority of bid-ask quotes on the NYSE reflects the trading interest of limit-order traders. We find that specialists tend to quote more actively for low-volume stocks and during...