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| Author: | Hansch, O. Naik, N. Y. Viswanathan, S. |
| Title: | Do inventories matter in dealership markets? |
| Journal: | Journal of Finance
1998 : OCT, VOL. 53:5, p. 1623-1656 |
| Index terms: | Inventory control Stock exchanges Dealer spreads Econometric models |
| Language: | eng |
| Abstract: | Using London Stock Exchange data, the authors test the implication of the canonical model of Ho and Stoll (1983, J. of Finance) that relative inventory differences determine dealer behavior. They find that relative inventories explain which dealers obtain large trades and show that movements between best ask, best bid, and stratddle are highly correlated with both standardized and relative inventory changes. They show that the mean reversion in inventories is highly nonlinear and increasing in inventory levels. The show that a key determinant of variations in interdealer trading is inventories and that interdealer trading plays an important role in managing large inventory positions. |
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