Review of Financial Studies Vol. 10 No. 3 1997
Entry, Exit, Market Makers, and the Bid-Ask Spread
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. Large-scale 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.
- DOI
- 10.1093/rfs/10.3.871
- Volume
- 10
- Issue
- 3
- Pages
- 871-901
- Language
- en
- Sources
- openalex crossref