IDEAS home Printed from https://ideas.repec.org/p/tiu/tiucen/995e0699-a8d9-4a58-a120-e13f014a58e4.html
   My bibliography  Save this paper

Asset Opacity and Liquidity

Author

Listed:
  • Stenzel, A.
  • Wagner, W.B.

    (Tilburg University, Center For Economic Research)

Abstract

Abstract: We consider a model of private information acquisition in which the cost of information depends on an asset's opacity. The model generates a hump-shaped relationship between opacity and the equilibrium amount of private information. In particular, the incentives to acquire information are largest for assets of intermediate opacity; such assets hence display low liquidity in the secondary market due to adverse selection. We also show that costly information acquisition generates incentives to source more correlated assets in the economy, as correlation reduces duplication of information costs. Our ndings have implications for the design of nancial regulation which aim at promoting transparency and reducing correlation in the fi nancial system.

Suggested Citation

  • Stenzel, A. & Wagner, W.B., 2013. "Asset Opacity and Liquidity," Discussion Paper 2013-066, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:995e0699-a8d9-4a58-a120-e13f014a58e4
    as

    Download full text from publisher

    File URL: https://pure.uvt.nl/ws/portalfiles/portal/1556897/2013-066.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Marco Pagano & Paolo Volpin, 2012. "Securitization, Transparency, and Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 25(8), pages 2417-2453.
    2. Fecht, Falko & Wagner, Wolf, 2007. "The marketability of bank assets and managerial rents: implications for financial stability," Discussion Paper Series 2: Banking and Financial Studies 2007,12, Deutsche Bundesbank.
    3. Cordella, Tito & Yeyati, Eduardo Levy, 2002. "Financial opening, deposit insurance, and risk in a model of banking competition," European Economic Review, Elsevier, vol. 46(3), pages 471-485, March.
    4. Todd Kaplan, 2006. "Why banks should keep secrets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 27(2), pages 341-357, January.
    5. Stenzel, André, 2018. "Security design with interim public information," Journal of Mathematical Economics, Elsevier, vol. 76(C), pages 113-130.
    6. Bruce Ian Carlin & Shimon Kogan & Richard Lowery, 2013. "Trading Complex Assets," Journal of Finance, American Finance Association, vol. 68(5), pages 1937-1960, October.
    7. Donald P. Morgan, 2002. "Rating Banks: Risk and Uncertainty in an Opaque Industry," American Economic Review, American Economic Association, vol. 92(4), pages 874-888, September.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tiu:tiucen:995e0699-a8d9-4a58-a120-e13f014a58e4. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Broekman). General contact details of provider: http://center.uvt.nl .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.