The effect of the introduction of market makers on stock liquidity: evidence in the brazilian stock market

Authors

DOI:

https://doi.org/10.21680/2176-9036.2021v13n2ID21269

Keywords:

Capital Market, Market Liquidity, Liquidity Agents

Abstract

Purpose: This study aimed to analyze whether the introduction of market makers in the trading of shares of Brazilian companies listed on the Brazilian stock exchange is a valid measure for increasing the market liquidity of these assets.

Methodology: The Chow structural break test was performed in the time series of the liquidity proxies, average spread, turnover index and financial volume, in a sample of 55 shares. We chose to consider data in the window of 260 days before and 260 days after the start of the market maker's activity, because it represents the approximate number of trading sessions in a year, and for avoiding erroneous conclusions due to the volatility of the Brazilian market.

Results: The results showed that after the introduction of market makers and considering a 99% confidence level, 67% of the shares studied had abrupt and statistically significant changes in the average spread, 47% had abrupt changes in turnover and 60% had changes in the volume of negotiation. By easing the confidence level to 95%, 76% of the shares studied showed abrupt changes in the average spread, 65% had changes in turnover and 69% showed changes in the volume of trades. At the 90% confidence level, the results found were 85% of shares showing abrupt changes in the average spread, 78% showing changes in turnover and 73% showing abrupt and statistically significant changes in the volume traded.

Contributions of the Study: This framework therefore provides strong evidence on the performance of market makers and the influence that these agents have on the market liquidity of shares traded by the Brazilian stock exchange, by demonstrating that, their contracting can increase liquidity and contribute significantly with shares negotiations.

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Author Biographies

Gabriel Augusto de Carvalho, Centro Federal de Educação Tecnológica de Minas Gerais (CEFET-MG)

Mestre em Administração pelo Centro Federal de Educação Tecnológica de Minas Gerais (CEFET-MG)

João Eduardo Ribeiro, Universidade Federal de Minas Gerais (UFMG)

Doutorando em Administração na Universidade Federal de Minas Gerais (UFMG).

Laíse Ferraz Correia, Centro Federal de Educação Tecnológica de Minas Gerais (CEFET-MG)

Doutora em Administração pela Universidade Federal de Minas Gerais (UFMG), Professora efetiva do Centro Federal de Educação Tecnológica de Minas Gerais (CEFET-MG).

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Published

02-07-2021

How to Cite

CARVALHO, G. A. de .; EDUARDO RIBEIRO, J.; CORREIA, L. F. . The effect of the introduction of market makers on stock liquidity: evidence in the brazilian stock market. REVISTA AMBIENTE CONTÁBIL - Universidade Federal do Rio Grande do Norte, [S. l.], v. 13, n. 2, p. 165–180, 2021. DOI: 10.21680/2176-9036.2021v13n2ID21269. Disponível em: https://periodicos.ufrn.br/ambiente/article/view/21269. Acesso em: 23 nov. 2024.

Issue

Vol. 13 No. 2 (2021): Jul./Dez.

Section

Section 1: Accounting Applied to the Business Sector (S1)

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