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Trade Disclosure, Information Learning and Securities Market Performance

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  • Wu, Chunchi
  • Zhang, Wei
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    Abstract

    In this paper we examine the effect of information disclosure on securities market performance when liquidity traders are able to acquire information about inside trading. We show that the bid-ask spread increases with the liquidity trader's learning efficiency, which is greater when trade information is disclosed. The bid-ask spread is always higher when trade information is not disclosed. However, the discrepancy between the bid-ask spreads with and without information disclosure narrows when the learning efficiency increases. We also show that the gains of the informed traders in a market without trade information disclosure are reduced in the presence of the liquidity trader's learning. Nevertheless, liquidity traders do not necessarily benefit from increased transparency. In particular, liquidity traders may face higher trading costs. Copyright 2002 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

    Volume (Year): 18 (2002)
    Issue (Month): 1 (January)
    Pages: 21-38

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    Handle: RePEc:kap:rqfnac:v:18:y:2002:i:1:p:21-38

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    Web page: http://springerlink.metapress.com/link.asp?id=102990

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    Cited by:
    1. Frutos Casado, Ángeles de & Manzano, Carolina, 2003. "Trade disclosure and price dispersion," Working Papers 2072/1773, Universitat Rovira i Virgili, Department of Economics.
    2. Michael Grüning, 2011. "Capital Market Implications of Corporate Disclosure: German Evidence," BuR - Business Research, German Academic Association for Business Research, vol. 4(1), pages 48-72, March.

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