Making a Market with Spreads and Depths

28 Pages Posted: 23 Sep 2004

See all articles by Kee H. Chung

Kee H. Chung

State University of New York at Buffalo - School of Management

Xin Zhao

Pennsylvania State University (Erie) - The Behrend College

Multiple version iconThere are 2 versions of this paper

Abstract

In this paper we study the quote revision behavior of NASDAQ market makers by analyzing inter-temporal changes in their spread and depth quotes. Using individual dealer quote and trade data for a sample of 2,319 stocks, we find that NASDAQ dealers make more frequent revisions in depths than in spreads and the extent of liquidity management is greater for stocks of smaller companies, lower-priced stocks, and stocks with larger trade sizes and fewer number of transactions. We show that intraday variation in the number of quote revisions follows the U-shaped pattern, indicating that the extent of liquidity management is greater during the early and late hours of trading than during midday.

JEL Classification: G10

Suggested Citation

Chung, Kee H. and Zhao, Xin Jessica, Making a Market with Spreads and Depths. Journal of Business Finance & Accounting, Vol. 31, No. 7-8, pp. 1069-1097, September 2004. Available at SSRN: https://ssrn.com/abstract=591499

Kee H. Chung (Contact Author)

State University of New York at Buffalo - School of Management ( email )

Buffalo, NY 14260
United States
716-645-3262 (Phone)
716-645-3823 (Fax)

HOME PAGE: http://mgt.buffalo.edu/faculty/academic-departments/finance/faculty/kee-chung.html

Xin Jessica Zhao

Pennsylvania State University (Erie) - The Behrend College ( email )

286 Burke
Erie, PA 16563-1400
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
24
Abstract Views
1,274
PlumX Metrics