Liquidity and Optimal Market Transparency

32 Pages Posted: 5 Mar 2008

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2007

Abstract

In this paper we 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. Our model allows for different levels of transparency, and therefore sheds light on how transparency affects market performance. We 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.

Keywords: Market Liquidity, Market Transparency, Strategic Specialist

JEL Classification: D82, G12, G14

Suggested Citation

Dumitrescu, Ariadna, Liquidity and Optimal Market Transparency (October 1, 2007). EFA 2008 Athens Meetings Paper. Available at SSRN: https://ssrn.com/abstract=942912 or http://dx.doi.org/10.2139/ssrn.942912

Ariadna Dumitrescu (Contact Author)

ESADE Business School ( email )

Av. Pedralbes 60-62
Barcelona, 08034
Spain

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