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Does Greater Market Transparency Reduce Information Asymmetry?

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  • Yaling Lin

Abstract

This research aims to determine whether the degree of asymmetric information decreases with greater pre-trade transparency in the Taiwan stock market. We used the probability of informed trading based on the Markov regime-switching model in an order-driven auction market to investigate this topic. Information asymmetry showed no conspicuous variations with greater transparency. However, after further grouping, the empirical results revealed that increased transparency facilitated a decrease in information asymmetry in the sub-samples, which originally exhibited greater information asymmetry. In addition, the intraday patterns of probability of informed trading revealed that greater transparency facilitates decreased market information asymmetry after opening.

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  • Yaling Lin, 2016. "Does Greater Market Transparency Reduce Information Asymmetry?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(11), pages 2565-2584, November.
    • Handle: RePEc:mes:emfitr:v:52:y:2016:i:11:p:2565-2584
    DOI: 10.1080/1540496X.2015.1087786
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    Cited by:

    1. Gregor Helmut Schoenemann, 2022. "The man in the middle—liquidity provision under central clearing in the credit default swap market: A regression discontinuity approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(3), pages 446-471, March.

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