Securities Regulation
Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders
Lawrence R. Glosten and Paul R. Milgrom
- Year
- 1985
- Venue
- Journal of Financial Economics
- Level
- Advanced
Summary
Explains bid-ask spreads as a response to adverse selection when market makers trade with both informed and uninformed participants. The model connects information asymmetry to liquidity costs and shows why market design and trading regulation affect the distribution of those costs.
Citation
Lawrence R. Glosten and Paul R. Milgrom. "Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders." Journal of Financial Economics, 1985.
DOI: 10.1016/0304-405X(85)90044-3
BibTeX
@article{Glosten1985Bid,
title = {Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders},
author = {Lawrence R. Glosten and Paul R. Milgrom},
year = {1985},
journal = {Journal of Financial Economics},
doi = {10.1016/0304-405X(85)90044-3},
url = {https://doi.org/10.1016/0304-405X(85)90044-3}
}