Dividing the Pie
2002-10-29
Research Paper
This publication is part of collection
| Related Files |
|---|
View PDF Version
(erimrs20021029120140.pdf, 0.2MB) |
We examine the consequences of transparency in an experimental multiple-dealer market with asymmetrically informed dealers. Five professional securities traders make a market for a single security. In each trading round, one of the dealers (the "insider") is told the security's true value. We vary both pre-trade and post-trade transparency by changing the way quote and trade information is published. The insider's profits are greatest when price efficiency is lowest. Price efficiency, in turn, is reduced by pre-trade transparency and increased by posttrade transparency. Market liquidity, measured by dealers' bid-ask spreads, is improved by pre-trade transparency and reduced by post-trade transparency.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- G10 : General Financial Markets: General
- M41 : Accounting
- G14 : Information and Market Efficiency; Event Studies
- D82 : Asymmetric and Private Information
- G3 : Corporate Finance and Governance
- M : Business Administration and Business Economics; Marketing; Accounting
Automatically Extracted Terms
- market
- transparency
- price
- insider
- dealer
- trading
- post-trade transparency
- information
- round
- post-trade
- price discovery
- pre-trade
- pre-trade transparency
- insider profits
- table
- market makers
- trade
- value
- transaction
- security
