Time Variation in Liquidity: The Role of Market-Maker Inventories and Revenues

• 成果类型: Article
• 署名作者: Comerton-Forde, Carole; Hendershott, Terrence; Jones, Charles M.; Moulton, Pamela C.; Seasholes, Mark S.
• 署名单位: University of Sydney; University of California System; University of California Berkeley; Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2009.01530.x
• 发表日期: 2010
• 页码: 295-331
• 关键词: EMPIRICAL-ANALYSIS; stock returns; NYSE; prices; RISK; Arbitrageurs; equilibrium; COMMONALITY; specialists; execution

摘要

We show that market-maker balance sheet and income statement variables explain time variation in liquidity, suggesting liquidity-supplier financing constraints matter. Using 11 years of NYSE specialist inventory positions and trading revenues, we find that aggregate market-level and specialist firm-level spreads widen when specialists have large positions or lose money. The effects are nonlinear and most prominent when inventories are big or trading results have been particularly poor. These sensitivities are smaller after specialist firm mergers, consistent with deep pockets easing financing constraints. Finally, compared to low volatility stocks, the liquidity of high volatility stocks is more sensitive to inventories and losses.