Volatility, market structure, and the bid-ask spread

Asia-Pacific Journal of Financial Studies

Volumn 38, Issue 1, 2009, Pages 67-107

  Chung, Kee H ^a   Kim, Youngsoo ^b  

^a UNIVERSITY AT BUFFALO   (United States)

^b UNIVERSITY OF REGINA   (Canada)

Author keywords

Bid ask spreads; Dealer; Fair and orderly markets; Market structure; Specialist

Indexed keywords

EID: 77957911950     PISSN: 12261165     EISSN: None     Source Type: Journal    
DOI: 10.1111/j.2041-6156.2009.tb00008.x     Document Type: Article

References (47)

1. Acharya, V. and L. Pedersen, 2005, Asset pricing with liquidity risk, Journal of Financial Economics 77, pp. 375-410. (Pubitemid 40975908)
2. Amihud, Y., 2002, Illiquidity and stock returns: Cross-section and time-series effects, Journal of Financial Markets 5, pp. 31-56. (Pubitemid 39659506)
3. Amihud, Y. and H. Mendelson, 1986, Asset pricing and the bid-ask spread, Journal of Financial Economics 17, pp. 223-249.
4. Amihud, Y. and H. Mendelson, 1989, The effect of beta, bid-ask spread, residual risk and size on stock returns, Journal of Finance 44, pp. 479-486.
5. Anand, A. and D. Weaver, 2006, The value of the specialist: Empirical evidence from the CBOE, Journal of Financial Markets 9, pp. 100-118. (Pubitemid 43624620)
6. Anderson, A. and E. Dyl, 2005, Market structure and trading volume, Journal of Financial Research 28, pp. 115-131. (Pubitemid 40344812)
7. Atkins, A. and E. Dyl, 1997, Market structure and reported trading volume: NASDAQ versus the NYSE, Journal of Financial Research 20, pp. 291-304. (Pubitemid 127129686)
8. Barclay, M., 1997, Bid-ask spreads and the avoidance of odd-eighth quotes on Nasdaq: An examination of exchange listings, Journal of Financial Economics 45, pp. 35-60. (Pubitemid 127166926)
9. Bennett, P. and L. Wei, 2006, Market structure, fragmentation and market quality, Journal of Financial Markets 9, pp. 49-78.
10. Bessembinder, H., 1999, Trade execution costs on Nasdaq and the NYSE: A postreform comparison, Journal of Financial and Quantitative Analysis 34, pp. 387-408.
11. Bessembinder, H., 2003a, Issues in assessing trade execution costs, Journal of Financial Markets 6, pp. 233-257. (Pubitemid 36412523)
12. Bessembinder, H., 2003b, Trade execution costs and market quality after decimalization, Journal of Financial and Quantitative Analysis 38, pp. 747-777. (Pubitemid 37537495)
13. Bessembinder, H., 2003c, Quote-based competition and trade execution costs in NYSE-listed stocks, Journal of Financial Economics 70, pp. 385-422. (Pubitemid 37378894)
14. Bessembinder, H. and H. Kaufman, 1997, A comparison of trade execution costs for NYSE and Nasdaq-listed stocks, Journal of Financial and Quantitative Analysis 32, pp. 287-310.
15. Bremer, M., T. Hiraki, and P. Sweeney, 1997, Predictable patterns after large stock price changes on the Tokyo Stock Exchange, Journal of Financial and Quantitative Analysis 32, pp. 345-365. (Pubitemid 127343291)
16. Blume, M. and M. Goldstein, 1997, Quotes, order flow, and price discovery, Journal of Finance 52, pp. 221-244.
17. Chan, K., W. Christie, and P. Schultz, 1995, Market structure and the intraday pattern of bid-ask spreads for NASDAQ securities, Journal of Business 68, pp. 35-60.
18. Christie, W. and P. Schultz, 1994, Why do NASDAQ market makers avoid odd-eighth quotes? Journal of Finance 49, pp. 1813-1840.
19. Chung, K. H., C. Chuwonganant, and D. T. McCormick, 2004, Order preferencing and market quality on NASDAQ before and after decimalization, Journal of Financial Economics 71, pp. 581-612. (Pubitemid 38254075)
20. Chung, K. H., B. Van Ness, and R. Van Ness, 1999, Limit orders and the bid-ask spread, Journal of Financial Economics 53, pp. 255-287.
21. Chung, K. H., B. Van Ness, and R. Van Ness, 2001, Can the treatment of limit orders reconcile the differences in trading costs between NYSE and NASDAQ issues?, Journal of Financial and Quantitative Analysis 36, pp. 267-286.
22. Chung, K. H., B. Van Ness, and R. Van Ness, 2004, Trading costs and quote clustering on the NYSE and NASDAQ after decimalization, Journal of Financial Research 27, pp. 309-328. (Pubitemid 39196151)
23. Chung, K. H. and X. Zhao, 2004, Price and quantity quotes on NASDAQ: A study of dealer quotation behavior, Journal of Financial Research 27, pp. 497-519. (Pubitemid 39558077)
24. Corwin, S. and M. Lipson, 2000, Order flow and liquidity around NYSE trading halts, Journal of Finance 55, pp. 1771-1801.
25. Ellis, K., R. Michaely, and M. O'Hara, 2000, The accuracy of trade classification rules: Evidence from NASDAQ, Journal of Financial and Quantitative Analysis 35, pp. 529-551.
26. Fama E. and J. MacBeth, 1973, Risk, return, and equilibrium: Empirical tests, Journal of Political Economy 81, pp. 607-636.
27. Garfinkel, J. and M. Nimalendran, 2003, Market structure and trader anonymity: An analysis of insider trading, Journal of Financial and Quantitative Analysis 38, pp. 591-610. (Pubitemid 37155639)
28. Goldstein, M. A. and K. A. Kavajecz, 2004, Trading strategies during circuit breakers and extreme market movements, Journal of Financial Markets 7, pp. 301-333. (Pubitemid 38407655)
29. Grossman, S., 1992, The informational role of upstairs and downstairs trading, Journal of Business 65, pp. 509-528.
30. Harris, L., 1994, Minimum price variations, discrete bid-ask spreads, and quotation sizes, Review of Financial Studies 7, pp. 149-178.
31. Huang, R. and H. Stoll, 1996, Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE, Journal of Financial Economics 41, pp. 313-357. (Pubitemid 126169749)
32. Haugen, R., E. Talmor, and W. Torous, 1991, The effect of volatility changes on the level of stock prices and subsequent expected returns, Journal of Finance 46, pp. 985-1007.
33. Heidle, H. and R. Huang, 2002, Information-based trading in dealer and auction markets: An analysis of exchange listings, Journal of Financial and Quantitative Analysis 37, pp. 391-424.
34. Kavajecz, K., 1999, A specialist's quoted depth and the limit order book, Journal of Finance 52, pp. 747-771.
35. Lee, C., B. Mucklow, and M. Ready, 1993, Spreads, depths, and the impact of earnings information: An intraday analysis, Review of Financial Studies 6, pp. 345-374.
36. Lee, C. and M. Ready, 1991, Inferring trade direction from intraday data, Journal of Finance 46, pp. 733-746.
37. Li, M., D. T. McCormick, and X. Zhao, 2005, Order imbalance and liquidity supply: Evidence from the bubble burst of NASDAQ stocks, Journal of Empirical Finance 12, pp. 533-555. (Pubitemid 41447988)
38. Madhavan, A. and G. Sofianos, 1998, An empirical analysis of NYSE specialist trading, Journal of Financial Economics 48, pp. 189-210. (Pubitemid 128338614)
39. Panayides, M., 2007, Affirmative obligations and market making with inventory, Journal of Financial Economics 86, pp. 513-542.
40. Pastor, L. and R. F. Stambaugh, 2003, Liquidity risk and expected stock returns, Journal of Political Economy 111, pp. 642-685. (Pubitemid 36967720)
41. Rock, K., 1990, The specialist's order book and price anomalies, Unpublished paper, Harvard University.
42. Schwert, G. W., 1989, Why does stock market volatility change over time?, Journal of Finance 44, pp. 1115-1153.
43. Seppi, D., 1997, Liquidity provision with limit orders and a strategic specialist, Review of Financial Studies 10, pp. 103-150.
44. Stoll, H., 1978, The pricing of security dealer services: An empirical study of Nasdaq stocks, Journal of Finance 33, pp. 1153-1172.
45. Stoll, H., 2000, Friction, Journal of Finance 55, pp. 1479-1514.
46. Venkataraman, K., 2001, Automated versus floor trading: An analysis of execution costs on the Paris and New York exchanges, Journal of Finance 56, pp. 1445-1488.
47. Venkataraman, K. and A. C. Waisburd, 2007, The value of the designated market maker, Journal of Financial and Quantitative Analysis 42, pp. 735-758.