We examine relations between institutional ownership and quoted bid-ask spreads in general, and the adverse-selection component of the spread in particular. For our sample of Nasdaq stocks, we find that high institutional ownership leads to narrower spreads and spreads with a smaller proportion...

We examine whether market makers believe institutional trades are informed by examining relations between institutional ownership and quoted bid-ask spreads in general, and the adverse-selection component of the spread in particular. For our sample of Nasdaq stocks from 1983 through 1991, we...