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Pre-trade transparency and informed trading : experimental evidence on undisclosed orders
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Gozluklu, Arie E. (2016) Pre-trade transparency and informed trading : experimental evidence on undisclosed orders. Journal of Financial Markets , 28 . pp. 91-115. doi:10.1016/j.finmar.2016.03.003 ISSN 1386-4181.
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Official URL: http://dx.doi.org/10.1016/j.finmar.2016.03.003
Abstract
I use experimental asset markets to analyze trading under different transparency and information settings. I find that both liquidity and informed traders use undisclosed orders to compete for liquidity provision. In opaque markets, traders increase aggressiveness
to improve execution probability. Without information friction, market opacity enhances liquidity, especially toward the end of trading, and is beneficial for liquidity traders.
Under informed trading, adverse selection drives market outcomes mainly around news announcements. Monopolistic insiders exploit opacity at the expense of large liquidity traders. Opacity does not affect informational e¢ ciency with a monopolistic insider, but value discovery is faster when informational rents are shared.
Item Type: | Journal Article | ||||||||||
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Subjects: | H Social Sciences > HG Finance Q Science > Q Science (General) |
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Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Liquidity (Economics), Information asymmetry, Insider trading in securities | ||||||||||
Journal or Publication Title: | Journal of Financial Markets | ||||||||||
Publisher: | Elsevier BV | ||||||||||
ISSN: | 1386-4181 | ||||||||||
Official Date: | March 2016 | ||||||||||
Dates: |
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Volume: | 28 | ||||||||||
Page Range: | pp. 91-115 | ||||||||||
DOI: | 10.1016/j.finmar.2016.03.003 | ||||||||||
Status: | Peer Reviewed | ||||||||||
Publication Status: | Published | ||||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||||
Date of first compliant deposit: | 9 March 2016 | ||||||||||
Date of first compliant Open Access: | 19 October 2017 | ||||||||||
Funder: | Università commerciale Luigi Bocconi, Universiteit van Tilburg | ||||||||||
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