Does Greater Market Transparency Reduce Information Asymmetry?. Issue 11 (1st November 2016)

• Record Type: Journal Article
• Authors: Lin, Yaling
• Is Part Of: Emerging markets finance & trade. Volume 52:Issue 11(2016)
• Page Start: 2565
• Page End: 2584
• Publication Date: 2016-11-01
• Subjects: information asymmetry -- informed trading -- pre-trade transparency; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2015.1087786
• Languages: English
• ISSNs: 1540-496X

Abstract

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.