Sun Yat-Sen Management Review

  Journal Fullview

Sun Yat-Sen Management Review  2005/12

Vol. 13, 英文特刊  p.73-104

The Quoting Behavior of a Specialist on the NYSE
The Quoting Behavior of a Specialist on the NYSE
(633428094398437500.pdf 143KB)

Min-Hsien Chiang/Institute of International Business National Cheng Kung University
Min-Hsien Chiang/


(633428094397812500.pdf 32KB)


Bid-Ask Spread, Bid-Ask Size, Specialist, Market Microstructure


This paper investigates the quote decision of the specialist on the NYSE. It is believed that the quote decision will affect many aspects on the trading strategies of different types of market participants, such as informed traders, liquidity traders, and market makers themselves, and on security price characteristics, such as volatility, the price evolution path, the spread size, and the spread pattern. Although the bid-ask spread behavior has been broadly explored in theories and empirical studies within the market microstructure area, there are few research works concentrating on the investigation of fundamental elements of a quote, i.e., the bid-ask prices and associated sizes. Therefore, the theoretical models and empirical estimation show how a specialist decides his bid-ask prices and sizes in this paper.

(633428094397812500.pdf 32KB)


Bid-Ask Spread, Bid-Ask Size, Specialist, Market Microstructure

Policy and management implications
(Available only in Chinese)

This study conducted an investigation into the quoting behavior of specialists. The research findings have managerial implications as follows: (1)Firstly, although public investors wish to buy or sell stocks at the best bid and ask prices, it is unlikely for them to do so in that there are few, if any, chances to get pertinent information with respect to the stocks in which they currently invest. Observing such investment behavior of major participants in the stock market (e.g., specialists, institutional investors and block investors) as quotation and buy/sell actions usually provide general public investors with important clues or criteria for investment judgments since the major participants embark on their investments based on superior market information they can get access to.. By knowing the quoting behavior of specialists, general investors may be able to have a good grip on how relevant information is disseminated within the market and then make appropriate investment decisions. (2)Secondly, the conclusions drawn in the research may enable liquidity providers in the stock market to have a better understanding of general public investors’ responses to their quoting and trading activities and adjust their buy/sell actions for achieving better performances of investment portfolios. Specialists may also clearly know how to do quotes and investments in order to fulfill the duties required by the stock exchange and the Securities and Exchange Commission (SEC), maintaining a continuous and fair trading market. (3)Finally, the conclusions could hopefully help the SEC establish a more thorough monitoring mechanism to surveillance whether the stock market is manipulated by a certain group of investors or not. Accordingly, the SEC may design more appropriate transaction rules for specialists to do quotes and make trades so that the stock market can become a fairly regulated environment in which investors can really trade with more information transparency and without fear of a winner’s curse. In such a liquid stock market, the listed companies can easily obtain enough capitals with lowest costs and the general public investors buy/sell stocks at the best bid/ask price.