2002-10-29
Dividing the Pie
Publication
Publication
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.
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Erasmus Research Institute of Management | |
hdl.handle.net/1765/248 | |
ERIM Report Series Research in Management | |
Organisation | Erasmus Research Institute of Management |
Flood, M. D., Koedijk, K., van Dijk, M., & van Leeuwen, I. (2002). Dividing the Pie (No. ERS-2002-101-F&A). ERIM Report Series Research in Management. Retrieved from http://hdl.handle.net/1765/248 |