Liquidity and Optimal Market Transparency

25 Pages Posted: 24 Aug 2010

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In this paper I explore some of the consequences of greater market transparency for market performance in the presence of a strategic specialist. Although numerous studies have dealt with this issue, previous work has only considered either fully transparent or fully opaque markets. My model allows for different levels of transparency, and therefore sheds light on how transparency affects market performance. I show that an intermediate level of transparency can improve market performance relative to the more extreme cases of full transparency or no transparency at all.

Suggested Citation

Dumitrescu, Ariadna, Liquidity and Optimal Market Transparency. European Financial Management, Vol. 16, Issue 4, pp. 599-623, September 2010. Available at SSRN: or

Ariadna Dumitrescu (Contact Author)

ESADE Business School ( email )

Av. Pedralbes 60-62
Barcelona, 08034

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