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Does Information Content Necessarily Increase with Greater Pre-Trade Transparency?

Author

Listed:
  • Yaling Lin

    (Department of Finance and Banking, I-Shou University, No. 1, Sec. 1, Syuecheng Rd., Dashu, Kaohsiung 840, Taiwan)

  • Tai Ma

    (Department of Finance, National Sun Yat-Sen University, No. 70, Lien-Hai Rd, Kaohsiung 804, Taiwan)

  • Hsiu-Kuei Chen

    (Department of Business Administration, Nan Jeon Institute of Technology, No. 178, Chau-Chin Road, Yen-Shui, 737, Taiwan)

Abstract

This study examines the impact of increasing pre-trade transparency using intraday data from the Taiwanese stock market, which has recently experienced gradually increasing transparency. The analytical results indicate the disclosed quotes are more informative than the accompanied depths, and the orders of institutional traders are more informative than those of individual traders. Additionally, the best quotes of unexecuted orders for individual traders always contain more information than the average quotes from Steps 2 to 5, whereas this does not apply for institutional investors. The feature is more obvious for the sub-samples with high and medium turnover rate, but not for the sub-samples with low turnover rate.

Suggested Citation

  • Yaling Lin & Tai Ma & Hsiu-Kuei Chen, 2008. "Does Information Content Necessarily Increase with Greater Pre-Trade Transparency?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 11(04), pages 531-554.
    • Handle: RePEc:wsi:rpbfmp:v:11:y:2008:i:04:n:s0219091508001465
    DOI: 10.1142/S0219091508001465
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    References listed on IDEAS

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    1. PASCUAL, Roberto & VEREDAS, David, 2004. "What pieces of limit order book information are informative ?," LIDAM Discussion Papers CORE 2004033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    More about this item

    Keywords

    Pre-trade transparency; limit order book; information content; intraday analysis; JEL Classification: G11; JEL Classification: G14;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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