GUTMANN CENTER FOR PORTFOLIO MANAGEMENT
at the University of Vienna - http//:www.gutmann-center.at
invites to the following
PUBLIC LECTURE:
- apologies for duplicated emails! -
Date: January 31st, 2008 (Thursday) - 4.00 pm
Location: Bank Gutmann AG, Schwarzenbergplatz 16, 1010 Wien
Speaker: Prof. Dr. Mark SEASHOLES, Santa Clara University, London
Business School and INSEAD
http://www.seasholes.com/
Title: TIME VARIATION IN LIQUIDITY:
THE ROLE OF MARKET MAKER INVENTORIES AND REVENUES
Abstract:
We use an 11-year panel of NYSE specialist inventory positions and
revenues to study two aspects of financial markets: stock price
reversals (temporary mispricings) and liquidity. Understanding when
stocks are mispriced and when liquidity is drying up is of key
importance to asset managers. We show that as stock prices go up,
market-makers sell. As stock prices fall, market-makers buy.
Market-makers are compensated for taking on risky positions via stock
price reversals. Sorting stocks based on inventory positions predict
reversals of 33 basis points over the following week and 45 basis points
over the following two weeks. Sorting stocks by current returns and
inventory positions can predict reversals of over 85 basis points per
week. Combining inventory positions with NYSE specialist revenues
allows us to predict liquidity (at the market-level) at a daily
frequency. As prices fall, market-makers lose money on current
positions. They also increase positions and thus risk. The net result
is that market-makers are less willing to provide liquidity. Our tests
are done at both the market-level and at the specialist firm level. Our
results suggest an important role for market makers' financial positions
in explaining the time variation of liquidity.
About Mark Seasholes:
Mark Seasholes is an Assistant Professor of Finance. He received his BA
from Wesleyan University and his AM and PhD degrees from Harvard
University. Mark's research focuses on investor behavior around the
world. He has written on cross-border equity investments, herding
behavior of individual investors, and loss aversion. Current work
focuses on the role and pricing of liquidity. One project looks at the
systematic liquidity demands of individual investors. A second project
studies NYSE specialist inventories (a measure of liquidity provided to
the market).
Mark studied physics at Wesleyan University. After graduating from
college, he spent a number of years working on Wall Street and in the
emerging markets of East/Central Europe. He has completed a valuation
project in Honduras, helped with the Lloyds of London restructuring, and
given a series of lectures in the People's Republic of China.
Professor Seasholes taught at U.C. Berkeley Haas School from 2000 to
2007 where he won teaching awards in three programs: Daytime MBA,
Undergrad Program, and Berkeley-Columbia Executive MBA. He continues to
teach in Executive Education programs where he receives top ratings.
Please REGISTER:
Mail: gutmann.bwl(a)univie.ac.at
Phone: +43-1-4277-38186 - Fax: +43-1-4277-38074
Contact and further information:
Gutmann Center for Portfolio Management
University of Vienna - Mag. Dorothea GRIMM
Bruenner Str. 72 - 1210 Wien (Austria)
phone: +43-1-4277-38186 - fax: +43-1-4277-38074
mail: gutmann.bwl(a)univie.ac.at - web:
www.gutmann-center.at