Odd-eighth avoidance as a defense against SOES bandits1
نویسندگان
چکیده
We model the behavior of Nasdaq momentum traders, also known as SOES bandits. We show, all things being equal, that the profitability of SOES bandits decreases in the bid-ask spread, but increases in the effective tick size. The patterns we observe in the data provide support for the model. We then discuss the plausibility of odd-eighth tick avoidance by market makers as a defense against SOES bandits. ( 1999 Elsevier Science S.A. All rights reserved. JEL classification: G10; L10
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