Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
961587 | Journal of Financial Markets | 2007 | 23 Pages |
Abstract
There is no consensus in the literature on whether an increase in pre-trade transparency results in an improvement or deterioration in market quality. Two discrete changes in pre-trade transparency on the Korea Exchange (KRX), an electronic order-driven market, allow us to address this question. We find that market quality is increasing and concave in pre-trade transparency, with significantly diminishing returns above a certain point. We argue that previous event studies of the effect of transparency have been econometrically flawed, propose a procedure to correct this flaw, and show that this procedure can reverse the result of an event study.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Kyong Shik Eom, Jinho Ok, Jong-Ho Park,