Trading and Pricing in Upstairs and Downstairs Stock Markets
- 1 July 2002
- journal article
- Published by Oxford University Press (OUP) in The Review of Financial Studies
- Vol. 15 (4) , 1111-1135
- https://doi.org/10.1093/rfs/15.4.1111
Abstract
We provide empirical evidence on the economic benefits of negotiating trades in the upstairs trading room of brokerage firms relative to the downstairs market. Using Helsinki Stock Exchange data, we find that upstairs trades tend to have lower information content and lower price impacts than downstairs trades. This is consistent with the hypotheses that the upstairs market is better at pricing uninformed liquidity trades and that upstairs brokers can give better prices to their customers if they know the unexpressed demands of other customers. We find that these economic benefits depend on price discovery occurring in the downstairs market.Keywords
This publication has 35 references indexed in Scilit:
- Price discovery and common factor modelsJournal of Financial Markets, 2002
- Internalization and stock price clustering: Finnish evidenceJournal of International Money and Finance, 2000
- Investor Psychology and Security Market Under‐ and OverreactionsThe Journal of Finance, 1998
- A model of investor sentiment1We are grateful to the NSF for financial support, and to Oliver Blanchard, Alon Brav, John Campbell (a referee), John Cochrane, Edward Glaeser, J.B. Heaton, Danny Kahneman, David Laibson, Owen Lamont, Drazen Prelec, Jay Ritter (a referee), Ken Singleton, Dick Thaler, an anonymous referee, and the editor, Bill Schwert, for comments.1Journal of Financial Economics, 1998
- Tick Size, Share Prices, and Stock SplitsThe Journal of Finance, 1997
- Arbitrage, Cointegration, and Testing the Unbiasedness Hypothesis in Financial MarketsJournal of Financial and Quantitative Analysis, 1995
- Stealth trading and volatilityJournal of Financial Economics, 1993
- Trading Mechanisms and Stock Returns: An Empirical InvestigationThe Journal of Finance, 1987
- Likelihood Ratio Statistics for Autoregressive Time Series with a Unit RootEconometrica, 1981
- Distribution of the Estimators for Autoregressive Time Series With a Unit RootJournal of the American Statistical Association, 1979