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| Author: | Snell, A. Tonks, I. |
| Title: | A theoretical analysis of institutional investors' trading costs in auction and dealer markets |
| Journal: | Economic Journal
2003 : JUL, VOL. 113:489, p. 576-597 |
| Index terms: | Auctions Costs Dealers Institutional investors Trading |
| Language: | eng |
| Abstract: | Trading costs are compared for institutional investors subject to liquidity shocks, in auction and dealer markets. The batch auction restricts the institutions' ability to exploit informational advantages because of competition between institutions when they simultaneously submit orders. This competition lowers aggregate trading costs. In the dealership market, competition between traders is absent but private information is revealed by observing the flow of successive orders and so reduces aggregate trading costs. The relative effects on trading costs of competition and information revelation are analysed in the two systems and a parameter inequality which determines which system has lower costs is derived. |
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