The effects of intraday news flow on dealers' quotations, market liquidity and volatility.

Market regulators emphasize that the reduction in dealers' liquidity to today's markets is one of the drivers of extreme behaviour such as flash crash. Yet the challenge is to understand the effects of intraday news flow on dealers' quotingbehaviour, high‐frequency returns, price volatility, liquidity, and trading activity. This paper addresses these issues shortly before the analyst recommendation changes on the Nasdaq. The sample period is 2004 at times where dealers were frequently displaying their quotations on the system. Results show that dealers remain active in quoting, in particular, in the events when the report is issued by their affiliated analysts. Their activity is associated with lower inside spreads, more trading, a more two‐sided market, and lower order imbalance.