Abstract
The probability of entry and exit of dealers on the NASDAQ National Market (NNM) is significantly affected by trading intensity, volatility and the quoted bid-ask spread. Entry and exit of market makers is a pervasive phenomenon. Largescale entry (exit) is associated with substantial declines (increases) in quoted end-of-day inside spreads, even after controlling for the effects of changes in volume and volatility. The spread changes are larger in magnitude for issues with few market makers; however, even for issues with a large number of market makers, substantial changes in quoted spreads take place. The results are consistent with the competitive model of dealer pricing.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 871-901 |
| Number of pages | 31 |
| Journal | Review of Financial Studies |
| Volume | 10 |
| Issue number | 3 |
| State | Published - Sep 1997 |
| Externally published | Yes |
Fingerprint
ASJC Scopus subject areas
- Accounting
- Economics and Econometrics
- Finance
Cite this
Entry, exit, market makers, and the bid-ask spread. / Wahal, Sunil.
In: Review of Financial Studies, Vol. 10, No. 3, 09.1997, p. 871-901.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Entry, exit, market makers, and the bid-ask spread
AU - Wahal, Sunil
PY - 1997/9
Y1 - 1997/9
N2 - The probability of entry and exit of dealers on the NASDAQ National Market (NNM) is significantly affected by trading intensity, volatility and the quoted bid-ask spread. Entry and exit of market makers is a pervasive phenomenon. Largescale entry (exit) is associated with substantial declines (increases) in quoted end-of-day inside spreads, even after controlling for the effects of changes in volume and volatility. The spread changes are larger in magnitude for issues with few market makers; however, even for issues with a large number of market makers, substantial changes in quoted spreads take place. The results are consistent with the competitive model of dealer pricing.
AB - The probability of entry and exit of dealers on the NASDAQ National Market (NNM) is significantly affected by trading intensity, volatility and the quoted bid-ask spread. Entry and exit of market makers is a pervasive phenomenon. Largescale entry (exit) is associated with substantial declines (increases) in quoted end-of-day inside spreads, even after controlling for the effects of changes in volume and volatility. The spread changes are larger in magnitude for issues with few market makers; however, even for issues with a large number of market makers, substantial changes in quoted spreads take place. The results are consistent with the competitive model of dealer pricing.
UR - http://www.scopus.com/inward/record.url?scp=0031475555&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0031475555&partnerID=8YFLogxK
M3 - Article
AN - SCOPUS:0031475555
VL - 10
SP - 871
EP - 901
JO - Review of Financial Studies
JF - Review of Financial Studies
SN - 0893-9454
IS - 3
ER -