Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We study a general static noisy rational expectations model, where investors have private information about asset payoffs, with common and private components, and about their own exposure to an aggregate risk factor, and derive conditions for existence and uniqueness (or multiplicity) of equilibria. We find that a main driver of the characterization of equilibria is whether the actions of investors are strategic substitutes or complements. This latter property in turn is driven by the strength of a private learning channel from prices, arising from the multidimensional sources of asymmetric information, in relation to the usual public learning channel. When the private learning channel is strong (weak) in relation to the public we have strong (weak) strategic complementarity in actions and potentially multiple (unique) equilibria. The results enable a precise characterization of whether information acquisition decisions are strategic substitutes or complements. We find that the strategic substitutability in information acquisition result obtained in Grossman and Stiglitz (1980) is robust. Terms of use: Documents inJEL-Code: D82, D83, G14.

Using a model of market making with inventories based on Biais (1993), we find that investors obtain more favorable execution prices, and they hence invest more, when markets are fragmented. In our model, risk-averse dealers use less aggressive price strategies in more transparent markets (centralized) because quote dissemination alleviates uncertainty about the prices quoted by other dealers and, hence, reduces the need to compete aggressively for order flow. Further, we show that the move toward greater transparency (centralization) may have detrimental effects on liquidity and welfare.

This paper analyzes the implications of pre-trade transpareny on market performance. We …nd that transparency increases the precision held by agents, however we show that this increase in precision may not be due to prices themselves. In competitive markets, transparency increases market liquidity and reduces price volatility, whereas these results may not hold under imperfect competition. More importantly, market depth and volatility might be positively related with proper priors. Moreover, we study the incentives for liquidity traders to engage in sunshine trading. We obtain that the choice of sunshine/dark trading for a noise trader is independent of his order size, being the traders with higher liquidity needs more interested in sunshine trading, as long as this practice is desirable. 1 directly to the market feed, or by purchasing a consolidated feed, it is also true that in the last ten years there has been a tendency to introduce anonymity into stock, bond, and foreign exchange markets. 2 Similarly, we are nowadays envisioning the evolution to dark trading in exchange markets. 3 An investigation on dark trading can be found in Bloom…eld et al. (2011). They compare visible markets in which all orders must be displayed, Iceberg (or reserve) markets that allow both displayed and partially displayed orders, and Hidden markets in which orders can be non-displayed. 4 There is broad agreement that transparency matters; it a¤ects the informativeness of the order ‡ow and, hence, the process of price discovery, but the key e¤ects of transparency on security markets are complex and contradictory. As pointed out by Eom et al. (2007) "...there is no consensus on whether an increase in pre-trade transparency results in an improvement or deterioration in market quality." These authors study changes in pre-trade transparency in the Korea Exchange. They conclude that market quality is increasing in pre-trade transparency. In the same line Boehmer et al. (2005) …nd that the introduction of OpenBook by the NYSE leads to a more active management of trading strategies and improvements in terms of liquidity and informational e¢ ciency. These results contrast with …ndings derived in Madhavan et al. (2005). This paper shows that an increase in pre-trade transparency in the Toronto Stock Exchange leads to wider spreads, lower depth, and higher volatility. This is consistent with the empirical evidence from the French Stock Exchange where liquidity increased after anonymity was introduced (see Foucault et al. (2007)), the same occurred when brokers identi…cation codes were removed at The Tokyo Stock Exchange (see Comerton-Forde et al. (2005)). Similarly, the experiments by Bloom…eld et al. (2011) support the robustness of informational e¢ ciency and liquidity in opaque regimes too.In this article we are concerned with pre-trade transparency in the form of disclosing information about the composition of the order ‡ow to market participants. Depending of who takes the disclosure decision, two types of pretrade transparency can be dis...

We analyze a divisible good uniform-price auction that features two groups each with a …nite number of identical bidders. At equilibrium the relative market power (price impact) of a group increases with the precision of its private information and declines with its transaction costs. An increase in transaction costs and/or a decrease in the precision of a bidding group's information induces a strategic response from the other group, which thereafter attenuates its response to both private information and prices. A "stronger" bidding group -which has more precise private information, faces lower transaction costs, and is more oligopsonistic-has more price impact and so will behave competitively only if it receives a higher per capita subsidy rate. When the strong group values the asset no less than the weak group, the expected deadweight loss increases with the quantity auctioned and also with the degree of payo¤ asymmetries. Price impact and the deadweight loss may be negatively associated. The results are consistent with the available empirical evidence.

Central banks often intervene secretly in the foreign exchange market. This secrecy seems to be at odds with the signalling channel. In this article we will analyse when a central bank intervening in the foreign exchange rate market purely through the signalling channel would prefer to act secretly or publicly. By using a microstructure model, we will show that the consistency of the intervention with fundamentals, the volume of noise trading, the weight given to the effectiveness of intervention and the degree of superior information held by the central bank will influence the decision to intervene secretly or publicly. Copyright © 2008 John Wiley & Sons, Ltd.