Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
960877 | Journal of Financial Markets | 2014 | 25 Pages |
Abstract
This paper analyzes the implications of pre-trade transparency on market performance. In competitive markets, transparency increases market liquidity and reduces price volatility, whereas these results may not hold under imperfect competition. More importantly, market depth and volatility might be positively related with proper priors. Moreover, we study the incentives for liquidity traders to engage in sunshine trading. We obtain that the choice of sunshine/dark trading for a noise trader is independent of his order size. The traders with higher liquidity needs are more interested in sunshine trading, as long as this practice is desirable.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
M. Ángeles de Frutos, Carolina Manzano,