Template-Type: ReDIF-Paper 1.0
Author-Name: Flood, M.D.
Author-Name-Last: Flood
Author-Name: Koedijk, C.G.
Author-Name-Last: Koedijk
Author-Name-First: Kees
Author-Name: van Dijk, M.A.
Author-Name-Last: van Dijk
Author-Name-First: Mathijs
Author-Person: pva122
Author-Name: van Leeuwen, I.W.
Author-Name-Last: van Leeuwen
Author-Name-First: Irma
Title: Dividing the Pie
Abstract: 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.
Creation-Date: 2002-10-29
File-URL: https://repub.eur.nl/pub/248/erimrs20021029120140.pdf
File-Format: application/pdf
Series: RePEc:ems:eureri
Number: ERS-2002-101-F&A
Classification-JEL: D82, G10, G14, G3, M, M41
Keywords: experimental economics, financial markets, information asymmetry, market microstructure
Handle: RePEc:ems:eureri:248