Economics, Econometrics and Finance
4 years ago

Opaque markets lead to faster price discovery and wider spreads.

SSRN Electronic Journal
Quote Disclosure and Price Discovery in Multiple Dealer Financial Markets
Mark D. Flood, Ronald Huisman, Kees C. G. Koedijk, Ronald Mahieu

Paper Summary

The study looked at how disclosing prices affects trading in financial markets. They compared markets where prices are public before trading to markets where prices are private. They found that in private markets, prices are higher and trading volume is lower because it's harder to find the best deal. However, in private markets, prices change more quickly, leading to faster price discovery.

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