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Does liquidity information matter? A view from fixed income dealers

Does liquidity information matter? A view from fixed income dealers
Does liquidity information matter? A view from fixed income dealers
Both the inventory theory and the asymmetric information theory assume that dealers possess no information advantage compared to other market participants. However, dealers can observe market liquidity from more aspects than any other participants do, and therefore have better information on market liquidity. Does this liquidity information advantage lead to profit? Using a detailed 3-month transaction data from London Stock Exchange, I examined dealer’s information advantage by analyzing dealers’ trading revenue and the components. The results strongly support that liquidity information does matter to dealers.
06/03
Bradford University School of Management
Peng, K.
193b3804-dd33-4d08-a06a-d5c5f5bf0529
Peng, K.
193b3804-dd33-4d08-a06a-d5c5f5bf0529

Peng, K. (2006) Does liquidity information matter? A view from fixed income dealers (Bradford University School of Management Working Paper Series, 06/03) Bradford, GB. Bradford University School of Management

Record type: Monograph (Working Paper)

Abstract

Both the inventory theory and the asymmetric information theory assume that dealers possess no information advantage compared to other market participants. However, dealers can observe market liquidity from more aspects than any other participants do, and therefore have better information on market liquidity. Does this liquidity information advantage lead to profit? Using a detailed 3-month transaction data from London Stock Exchange, I examined dealer’s information advantage by analyzing dealers’ trading revenue and the components. The results strongly support that liquidity information does matter to dealers.

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Published date: June 2006

Identifiers

Local EPrints ID: 80479
URI: http://eprints.soton.ac.uk/id/eprint/80479
PURE UUID: 174913ba-69a6-4237-b9d5-2eb11db0a526

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Date deposited: 24 Mar 2010
Last modified: 10 Dec 2021 17:38

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Contributors

Author: K. Peng

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