| Autor: |
Charles Cao, Hyuk Choe, Frank Hatheway |
| Rok vydání: |
1997 |
| Předmět: |
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| Zdroj: |
Journal of Finance. 52(4):1615-40 |
| Popis: |
This article tests for differences in execution costs among specialist firms for New York Stock Exchange listed securities. Execution cost differences provide a measure of the relative performance of specialist firms. We find a substantial difference in effective spreads and order processing costs across specialist firms, controlling for stock characteristics. While economically significant, the differences in execution costs between specialist firms are much smaller than the cross-market differences reported by Huang and Stoll (1996). Within a specialist firm, there is a positive relation between order processing costs and trading activity that is consistent with the hypothesis that active stocks subsidize inactive stocks. THIS ARTICLE INVESTIGATES WHETHER differential execution costs exist across New York Stock Exchange (NYSE) specialist firms and among stocks traded by the same specialist firm. Execution costs are paid by investors when completing a trade, and are separate from the commission costs paid to a broker. Execution costs arise from the bid-ask spread and the price impact of an investor’s order on the future bid-ask quote. Stoll(1985) shows that a transactionally efficient financial market which minimizes execution costs also minimizes the deviation in transaction prices from the true price of the underlying security. Evidence of differential execution costs for similar securities can be used to identify high cost and low cost liquidity providers on the NYSE. Furthermore, differential execution costs among stocks traded by the same specialist firm provide evidence consistent with a subsidy from actively traded to inactively traded stocks. |
| Databáze: |
OpenAIRE |
| Externí odkaz: |
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