Financial Intermediation and the Costs of Trading in an Opaque Market

Details

Serval ID
serval:BIB_09CBC5CD8A57
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Financial Intermediation and the Costs of Trading in an Opaque Market
Journal
Review of Financial Studies
Author(s)
Green R.C., Hollifield B., Schuerhoff N.
ISSN
0893-9454
Publication state
Published
Issued date
03/2007
Peer-reviewed
Oui
Volume
20
Number
2
Pages
275-314
Language
english
Notes
Roman L. Weil Prize honorable mention 2004
Abstract
Municipal bonds trade in opaque, decentralized broker-dealer markets in which price information is costly to gather. We analyze a database of trades between broker-dealers and customers in municipal bonds. These data were only released to the public with a lag; the market was opaque. Dealers earn lower average markups on larger trades, even though dealers bear a higher risk of losses with larger trades. We estimate a bargaining model and compute measures of dealer?s bargaining power. Dealers exercise substantial market power. Our measures of market power decrease in trade size and increase in the complexity of the trade for the dealer.
Web of science
Create date
19/11/2007 9:28
Last modification date
20/08/2019 12:31
Usage data