isn't the point here that - at the moment a trade is executed - the number
of buyers and the number of sellers are equal. before that, though, there
can be more people seeking to sell than seeking to buy (or vice versa) and
that is why prices change & the market can clear?

> -----Original Message-----
> From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of
> William Dickens
> Sent: Friday, September 21, 2001 4:19 PM
> Subject: RE: # buyers = # sellers ?
> I never said that # buyers always and everywhere # of sellers. I
> specifically said "if the market is operating" there is a buyer
> for every seller. It is certainly true that specialists on the
> floor of the NYSE often suspend trading in a stock when there is
> an imbalance of orders and that bids on the NASDAQ are for
> specific quantities of stock. However, has there ever been a case
> where orders to sell at the market in the NASDAQ were not
> executed for extended periods of time on a stock that was
> officially still trading? If not, I stand by my statement. It is
> actually quite remarkable that security markets so regularly
> clear completely even in the most tumultuous times.
> However, I would be the last person to claim that this means that
> asset markets aren't prone to a wide range of anomalous behavior.
>  - - Bill Dickens
> William T. Dickens
> The Brookings Institution
> 1775 Massachusetts Avenue, NW
> Washington, DC 20036
> Phone: (202) 797-6113
> FAX:     (202) 797-6181
> AOL IM: wtdickens
> >>> [EMAIL PROTECTED] 09/21/01 06:12AM >>>
> Economists (and I am one) can smirk at commentators saying 'that there are
> more buyers than sellers', but from a market practioners point of
> view, that
> is certainly how it feels at times.
> Financial markets have traders who maintain large stocks of whatever they
> are trading.  When a piece of highly adverse news is reported,
> traders 'mark
> down' their holdings, that is they give a considered guess as to
> the fall in
> value of their holding due to the news and adjust prices
> accordingly.  Thus
> prices traders are willing to bid have fallen, but there has been
> no market
> input.  For instance, if you were holding a lot of airline stocks on 11
> Sept, how much had their value declined by the time markets reopened? Yes,
> such stocks would have lots of offers to sell, but there would be
> comparatively wide spread and few bids to buy, moreover if you
> tried to take
> a trader up on the bid, they would only be wiling to buy a small amount.
> The rules and regulations of the market may well say, traders must make a
> market, but it is often the case that the bid is only open to
> good customers
> or for very small amounts of stock.
> Two more examples.
> The dot com bubble had many companies valued at absurd amounts, why?  One
> reason, it was often the case that only a small amount of the companies
> stock had been released for sale, the vast majority still being
> held by the
> founders, who were locked into maintaining their holdings.  Yet the whole
> company was valued at the price which a small portion of the stock was
> trading.  Many people were willing to buy, but few would or could
> sell.  The
> price went up, but the bids went unfulfilled.
> Or a downside case.  My old firm, Bankers Trust, was sold to Deutsche Bank
> when its stock of high yield bonds became worthless in the rush to safety
> that followed the collapse of the Russian bond markets.  These high yield
> bonds, all in US companies, were valued at zero if you look at the bid
> price, there was no one in the market willing to buy.  There were
> of course
> many offers to sell, but the holders of the stock were not
> willing to go all
> the way down to the offer price (which was in this case zero).
> Yet within a
> couple of months (and after our Chairman had sold the company and pocketed
> over $80 million in doing so) the market regained its composure and the
> bonds were again in demand.  The price went down, but the offers were not
> taken up.
> I can fully understand the theory of making a market, and it does
> work over
> the medium term, but significant anomalies, sometimes months long, can and
> have been seen.
> James
> -----Original Message-----
> From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of
> Alex Tabarrok
> Sent: 20 September 2001 17:40
> Subject: # buyers = # sellers ?
>       When the stock market goes up or down and some pundit says
> there were
> more sellers than buyers (or vice-versa) it's common for economists to
> point out that for every buyer there is a seller.  (Bill made this
> argument recently and I have said this before also).  Of course the
> argument is correct in the sense that someone must buy what others
> sell.  The argument is generally incorrect, however, if taken to mean
> that the number of buyers equals the number of sellers because it could
> be the case that many buy and few sell but each seller sells more than
> each buyer buys.  Which leads me to my question.  Does the number of
> buyers and sellers vary with the direction of stock movements?  For
> example, during a crash is it the case that a few buyers are buying a
> lot and many sellers are selling a little?  Does anyone know of work
> done on this question?
> Cheers
> Alex
> --
> Dr. Alexander Tabarrok
> Vice President and Director of Research
> The Independent Institute
> 100 Swan Way
> Oakland, CA, 94621-1428
> Tel. 510-632-1366, FAX: 510-568-6040

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