Reputation Effects in Trading on the New York Stock Exchange

  • Author(s): ROBERT BATTALIO, ANDREW ELLUL, ROBERT JENNINGS
  • Published: May 08, 2007
  • Pages: 1243-1271
  • DOI: 10.1111/j.1540-6261.2007.01235.x

ABSTRACT

Theory suggests that reputations allow nonanonymous markets to attenuate adverse selection in trading. We identify instances in which New York Stock Exchange (NYSE) stocks experience trading floor relocations. Although specialists follow the stocks to their new locations, most brokers do not. We find a discernable increase in liquidity costs around a stock's relocation that is larger for stocks with higher adverse selection and greater broker turnover. We also find that floor brokers relocating with the stock obtain lower trading costs than brokers not moving and brokers beginning trading post‐move. Our results suggest that reputation plays an important role in the NYSE's liquidity provision process.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version