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An Analysis of Individual NYSE Specialist Portfolios and Execution Quality
Author(s) -
Liu Jerry W.
Publication year - 2009
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2009.00220.x
Subject(s) - volatility (finance) , business , quality (philosophy) , stock (firearms) , financial economics , economics , finance , geography , philosophy , epistemology , archaeology
The value of specialist assistance to the trading of low‐volume stocks has important implications in exchange design. We study the relation between the structure of individual specialist portfolios and the transitory volatility of low‐volume stocks in these portfolios under the traditional NYSE auction‐dealer market structure. We find that the trading quality for inactive stocks is positively related to the trading volume of active stocks in the same specialist portfolios. These results are consistent with specialist subsidization of low‐volume stocks in their portfolios and suggest that specialists provide important support to the trading of inactive stocks if they have the resources.