Security prices and market transparency: the role of prior information
AbstractThis paper analyzes the role of traders' priors (proper versus improper) on the implications of market transparency by comparing a pre-trade transparent market with an opaque market in a set-up based on Madhavan (1996). We show that prices may be more informative in the opaque market, regardless of how priors are modelled. In contrast, the comparison of market liquidity and volatility in the two market structures are affected by prior specification. Key words: Market microstructure, Transparency, Prior information
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Bibliographic InfoPaper provided by Universitat Rovira i Virgili, Department of Economics in its series Working Papers with number 2072/1754.
Date of creation: 2005
Date of revision:
Mercat de capitals; Informació privilegiada;
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