Can Investors Benefit from Market Transparency? An Asset Allocation Perspective
Nolte, Ingmar, Payne, R. and Vasios, Michalis (2012) Can Investors Benefit from Market Transparency? An Asset Allocation Perspective. Working Paper. Unpublished.Full text not available from this repository.
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|
|Number of Pages:||48|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Restricted or Subscription Access|
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