Liquidity in auction and specialist market structures: Evidence from the Italian bourse

Stock repurchases and treasury share sales: Do they stabilize price and enhance liquidity?

“…Jain (2003) studies a dataset of large stocks from 51 exchanges and finds that the presence of market makers is associated with higher liquidity. Nimalendran and Petrella (2003), Frino et al (2008), and Perotti and Rindi (2010) show that the introduction of a specialist leads to higher liquidity in the Italian stock exchange. Also, improvements in market quality owing to the activities of market makers are found on the French (Venkataraman and Waisburd, 2007), Swedish (Anand et al, 2009), and Dutch (Menkveld and Wang, 2011) markets.…”

“…Several quantitative analyses find that greater trading frictions (higher spreads) increase volatility (see, for example, Amihud and Mendelson, 1987;Kaul and Nimalendran, 1990;Koski, 1998;Wang and Yau, 2000), and report a positive correlation between trading volume and volatility (see, for example, Karpoff, 1987;Harris and Raviv, 1993;Shalen, 1993). There is also evidence on the impact of trading volume on volatility (see, for example, Schwert, 1989;Gallant et al, 1992;Lamourex and Lastrapes, 1990;Stoll and Whaley, 1990;Lee and Rui, 2002). Moreover, Duffee (1995) finds a positive contemporaneous relationship between return and return volatility.…”

Dealer attention, the speed of quote adjustment to information, and net dealer revenue

“…30 s speed measure for the main presentation, and discuss in the text results for other measures. We draw upon empirical analyses of the spread and spread components performed by Harris (1994), Bessembinder and Kaufman (1997), Cao et al (1997), Madhavan and Sofianos (1998), Chung and Chuwonganant (2007), and Frino et al (2008) to choose other explanatory variables. Collectively, these studies imply that we should control for the natural log of dollar volume, the natural log of average trade size, the inverse of average price, the natural log of market capitalization, and the standard deviation of daily returns.…”

Specialists as risk managers: The competition between intermediated and non-intermediated markets

“…Thus, the combined value of the specialist's risk management and trading cost reduction services can be viewed as the private value of these services to investors (net of any public good benefits). 17 For recent empirical applications of the current theoretical market microstructure framework, see Frino et al (2008), Bollen andChristie (2009), Aktas et al (2008). 18 Note that with a non-intermediated market as a competitor, the specialist's viability is not guaranteed.…”