Consistent with recent theoretical models where binding capital constraints lead to sudden liquidity dry-ups, we find that negative market returns decrease stock liquidity, especially for high volatility stocks and during times of tightness in the funding market. The asymmetric effect of changes...

The practices of preferencing, internalization, and best execution have been criticized as causing worse execution in dealership markets like NASDAQ relative to auction style markets like the NYSE. We study the quality of executions and the profitability of market making for internalized,...

Using London Stock Exchange data, we test the central implication of the canonical model of Ho and Stoll (1983) that relative inventory differences determine dealer behavior. We find that relative inventories explain which dealers obtain large trades and show that movements between best ask,...