Analyst Recommendations and NASDAQ Market Making Activity

Rutgers University Economics Working Paper No. 2003-07

50 Pages Posted: 11 Feb 2004

See all articles by Bruce Mizrach

Bruce Mizrach

Rutgers University, Department of Economics

Date Written: December 2003

Abstract

I investigate the linkage between liquidity provision by Nasdaq market makers and analysts in the same firm. Using three measures of market activity, I find that Nasdaq firms are more likely to provide buy side liquidity in anticipation of upgrades in the period 1999-2000. ECN activity supports this pattern. Firm level evidence shows that 15 of 42 market makers studied engage in significant pre-recommendation activity. I estimate cumulative abnormal returns of more than 75% and profits of almost $600 million in a sample of 47 large capitalization stocks.

Keywords: Analyst, Nasdaq, market maker

JEL Classification: G14, G24

Suggested Citation

Mizrach, Bruce, Analyst Recommendations and NASDAQ Market Making Activity (December 2003). Rutgers University Economics Working Paper No. 2003-07, Available at SSRN: https://ssrn.com/abstract=499103 or http://dx.doi.org/10.2139/ssrn.499103

Bruce Mizrach (Contact Author)

Rutgers University, Department of Economics ( email )

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