An Empirical Investigation of Bid-Ask Spreads on Nasdaq Europe
(2002) International AFFI Conference — Location: Strasbourg, France
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- Authors
- Abstract
- (en) This paper empirically investigates market makers' behavior on Nasdaq Eu-rope. The impact of market makers' competition and some other microstructure effects on spreads are analyzed. We perform a decomposition of the spread into its components in both the Huang & et Stoll (1997) and the Lin et al. (1995) set-tings. The main finding is the small adverse selection component on this rather thin market, together with a high serial correlation in the order ow. Although the spread decomposition does not succeed in identifying inventory costs, we show that market makers manage their inventories effectively. However, rever-sion to a desired inventory level appears to be slow, compared to more active markets.
- Affiliations
Louvain School of Management Accounting & Finance
Citations
De Winne, R., & Platten, I. (2002). An Empirical Investigation of Bid-Ask Spreads on Nasdaq Europe. International AFFI Conference, Strasbourg, France. https://hdl.handle.net/2078.5/129628