Premium
Liquidity and Optimal Market Transparency
Author(s) -
Dumitrescu Ariadna
Publication year - 2010
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1468-036x.2008.00474.x
Subject(s) - transparency (behavior) , market liquidity , business , opacity , economics , monetary economics , industrial organization , computer science , computer security , physics , optics
In this paper I explore some of the consequences of greater market transparency for market performance in the presence of a strategic specialist. Although numerous studies have dealt with this issue, previous work has only considered either fully transparent or fully opaque markets. My model allows for different levels of transparency, and therefore sheds light on how transparency affects market performance. I show that an intermediate level of transparency can improve market performance relative to the more extreme cases of full transparency or no transparency at all.