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Comment: Assessing the Impact of Stock Exchange Specialists on Stock Volatility

Published online by Cambridge University Press:  19 October 2009

Robert A. Schwartz  and
David K. Whitcomb
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Extract

In a recent article in this Journal, Amir Barnea [1] proposes a criterion for assessing the market-making efficiency of New York Stock Exchange specialists. The appealing aspects of Barnea's method are that it uses publicly available data (common stock prices) and operates on a variable of primary concern to investors, the variance of returns on common stock. The difficulty we see in applying his approach, however, is that Barnea's performance criterion can be sensitive to a number of factors in addition to any impact the specialist might have, and that effective specialist intervention might have either a positive or negative impact on the performance measure. Thus, his specialist ranking seems to be quite misleading, and his empirical findings appear to be amenable to a substantially different interpretation than that which he provides.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 11 , Issue 5 , December 1976 , pp. 901 - 908
Copyright
Copyright © School of Business Administration, University of Washington 1976

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References

REFERENCES

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