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Jurnal

Journal of Financial Economics

Keyword

Market design; Opacity; Asymmetric information

Pengarang

  1. Cyril Monnet
  2. Erwan Quintin

    Subject

    1. ECONOMIC
    2. FINANCIAL

      [Abstrak]

      Opacity
      assumes at least two prominent forms in asset markets. Dark exchanges
      and over-the-counter markets enable expert investors to hide their
      orders while originators carefully control the disclosure of fundamental
      information about the assets they source. We describe a simple model in
      which both forms of opacity – hidden orders and limited disclosure –
      complement one another. Costly investor expertise gives originators
      incentives to deliver assets of good quality. Keeping expert orders
      hidden generates the rents investors need to justify investing in
      expertise in the first place. Limiting disclosure mitigates the
      resulting adverse selection issues. Originators prefer to restrict the
      information they can convey to experts because it encourages the
      participation of non experts. This optimal organization of asset markets
      can be decentralized using standard financial arrangements.


      Periode

      Vol 123, Nomor 3, Tahun 2017

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