Bid, ask and transaction prices in a specialist market with heterogeneously informed traders Export

@article{citeulike:2176873, abstract = {The presence of traders with superior information leads to a positive bid-ask spread even when the specialist is risk-neutral and makes zero expected profits. The resulting transaction prices convey information, and the expectation of the average spread squared times volume is bounded by a number that is independent of insider activity. The serial correlation of transaction price differences is a function of the proportion of the spread due to adverse selection. A bid-ask spread implies a divergence between observed returns and realizable returns. Observed returns are approximately realizable returns plus what the uninformed anticipate losing to the insiders.}, author = {Glosten, Lawrence R. and Milgrom, Paul R.}, citeulike-article-id = {2176873}, citeulike-linkout-0 = {http://dx.doi.org/10.1016/0304-405X(85)90044-3}, citeulike-linkout-1 = {http://linkinghub.elsevier.com/retrieve/pii/0304-405X(85)90044-3}, citeulike-linkout-2 = {http://www.sciencedirect.com/science/article/B6VBX-45MFS6V-5/2/2779b34247ff1359578f29e67d1bf867}, doi = {10.1016/0304-405X(85)90044-3}, journal = {Journal of Financial Economics}, month = {March}, number = {1}, pages = {71--100}, posted-at = {2009-05-06 08:17:49}, priority = {2}, title = {Bid, ask and transaction prices in a specialist market with heterogeneously informed traders}, url = {http://dx.doi.org/10.1016/0304-405X(85)90044-3}, volume = {14}, year = {1985} }

TY - JOUR ID - citeulike:2176873 L3 - citeulike-article-id:2176873 N2 - The presence of traders with superior information leads to a positive bid-ask spread even when the specialist is risk-neutral and makes zero expected profits. The resulting transaction prices convey information, and the expectation of the average spread squared times volume is bounded by a number that is independent of insider activity. The serial correlation of transaction price differences is a function of the proportion of the spread due to adverse selection. A bid-ask spread implies a divergence between observed returns and realizable returns. Observed returns are approximately realizable returns plus what the uninformed anticipate losing to the insiders. IS - 1 JF - Journal of Financial Economics EP - 100 TI - Bid, ask and transaction prices in a specialist market with heterogeneously informed traders VL - 14 SP - 71 AU - Glosten, Lawrence AU - Milgrom, Paul PY - 1985/03// UR - http://dx.doi.org/10.1016/0304-405X(85)90044-3 ER -