Does the specialist matter? Differential execution costs and intersecurity subsidization on the New York stock exchange

Charles Cao, Hyuk Choe, Frank Hatheway

Research output: Contribution to journalArticle

44 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)1615-1640
Number of pages26
JournalJournal of Finance
Volume52
Issue number4
DOIs
StatePublished - Sep 1997

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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