The Trades of Market Makers: An Empirical Analysis of NYSE Specialists

Joel Hasabrouck and George Sofianos

Journal of Finance, 1993, vol. 48, issue 5, 1565-93

Abstract: This paper presents a transaction-level empirical analysis of the trading activities of New York Stock Exchange specialists. The main findings of the analysis are the following: adjustment lags in inventories vary across stocks and are in some cases as long as one or two months; decomposition of specialist trading profits by trading horizon shows that the principal source of these profits is short term; an analysis of the dynamic relations among inventories, signed order flow, and quote changes suggests that trades in which the specialist participates have a higher immediate impact on the quotes than trades with no specialist participation. Copyright 1993 by American Finance Association.

Date: 1993
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