search query: @author Heflin, F. / total: 5
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| Author: | Heflin, F. Shaw, K. W. |
| Title: | Adverse selection, inventory-holding costs, and depth |
| Journal: | Journal of Financial Research
2001 : SPRING, VOL. 24:1, p. 65-82 |
| Index terms: | ADVERSE SELECTION RISK TRADE |
| Language: | eng |
| Abstract: | The authors examine whether specialist depth quotes are related to the adverse-selection and inventory-holding-cost components of the spread. Consistent with theory that predicts an inverse relation between depths and informed trading risk, the authors find that depth quotes are strongly inversely related to the adverse-selection component of the spread. The authors also find that depth quotes are inversely related to the inventory-holding- cost component, though this relation is weaker than the relation between depths and adverse selection. The authors' evidence suggests cross-sectional variation in depths is driven primarily by variation in informed trading risk, as proxied for by the adverse-selection component, rather than by inventory concerns. |
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