Nolte, Ingmar, Payne, R. and Vasios, Michalis (2012) Can Investors Benefit from Market Transparency? An Asset Allocation Perspective. Working Paper. Unpublished.

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Abstract

A current debate in finance concerns transparency in financial markets and the disclosure of counterparty identity information. We use a simple mean-variance framework and data from Helsinki Stock Exchange to explore the asset allocation implications of post-trade market transparency. We find that broker identity conveys information that is economically significant. A mean-variance investor can benefit remarkably, up to 36% (annualized) percentage points for the most parsimonious forecasting model, from knowing who trades. A second result is the substantial variation in the information content of order flow at the broker level. We show that the predictive power of broker customer order flow can be attributed to observable broker-specific characteristics: market share, daily volume, investment style and degree of sophistication.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School
Series Name:	Working Paper Series
Publisher:	Unpublished
Date:	2012
Number of Pages:	48
Status:	Not Peer Reviewed
Access rights to Published version:	Restricted or Subscription Access
Related URLs:	Other Repository
URI:	http://wrap.warwick.ac.uk/id/eprint/44853

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