Photo by sharonmccutcheon from unsplash
I explore a reform at the Oslo Stock Exchange to assess the causal effect of trader anonymity on liquidity and trading volume. Using a regression discontinuity approach, I find that… Click to show full abstract
I explore a reform at the Oslo Stock Exchange to assess the causal effect of trader anonymity on liquidity and trading volume. Using a regression discontinuity approach, I find that anonymity leads to a reduction in bid-ask spreads by 40% and an increase in trading volume by more than 50%. The increase in trading volume is mostly accounted for by an increase in trading activity by institutional investors. These results are consistent with theoretical frameworks where informed traders supply and improve liquidity in anonymous markets.
Journal Title: Journal of Finance
Year Published: 2020
Link to full text (if available)
Share on Social Media: Sign Up to like & get
recommendations!