The impact of post-trade transparency on price efficiency and price discovery

Abstract

Purpose The purpose of this paper is to examine the impact of post-trade transparency on price efficiency and price discovery. Design/methodology/approach The authors use an exogeneous change in market transparency in the Taiwan Stock Exchange that mandates the disclosure of unexecuted orders of the five best bid and ask prices after each trade, and conduct an event study analysis. Findings After the change, price efficiency enhances for both large and small firms, although the impact on stock prices is greater when the firm is larger. The authors also find that post-change trading reveals more private information for large firms but more public information for small firms. The findings support the view that transparency has a positive impact on market quality. Originality/value The paper adds to a large body of literature investigating the relationship between transparency and market behavior, especially the ongoing debate about whether trading transparency positively affects price dynamics. The findings also have important policy implications for the regulators.

Fiscal Policy and Stock Market Efficiency in the USA: An ARDL Bounds Testing Approach

“…Rose, Paparas, Tremma, and Aguiar (2019) suggested that to address and respond to these gaps and limitations pointed out by previous studies, the contextual variables and factors of FP affecting the market price and efficiency need to be evaluated and identified in detail and effective manner. Since the studies and research efforts on the fiscal policy and its impacts on the overall market efficiency are limited and sparse, this study needs to be completed on the markets of the USA (Lin, Chiao, & Wang, 2019). Therefore, the current research is new and justified in understanding the exclusive impact of FP on market efficiency in the context of USA markets.…”