Trade Disclosure, Information Learning and Securities Market Performance
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.
Business | Finance and Financial Management | Portfolio and Security Analysis
Review of Quantitative Finance and Accounting
WU, Chunchi and ZHANG, Wei.
Trade Disclosure, Information Learning and Securities Market Performance. (2002). Review of Quantitative Finance and Accounting. 18, (1), 21-38. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/794