A Cross-Country Model for the Influence of the Pre-Trade Transparency on Market Liquidity and Price Volatility

Caterina Lucarelli, Camilla Mazzoli, Giulio Palomba
2008 The Journal of Trading  
In this paper we examine how the pre-trade transparency (PTT), a specific market microstructure feature, affects the liquidity and the price volatility of a Stock Exchange. In particular, we estimate a system of simultaneous equations for a set of liquidity and volatility indicators as a function of the PTT, given a series of control variables. Our main finding is that transparency increases liquidity and reduces volatility and this is coherent with part of the existing literature. Moreover,
more » ... analysis provides empirical evidence of a series of liquidity-volatility interconnections. JEL: C31, G12, G14, G15
doi:10.3905/jot.2008.708837 fatcat:vujpyqpdrrbkle6r2ixmnqldti