speaker time

Finance Seminar2019-14)

Topic: The Effects of Transparency on Trading Profits and Price Informativeness: Evidence from Corporate Bonds

Speaker: Michael Schwert,The Wharton School, University of Pennsylvania

Time: Friday, 17 May, 10:00-11:30

Location: Room 217, Guanghua Building 2


This paper examines the effects of post-trade price transparency on the allocation of trading surplus in the corporate bond market. Using the introduction of TRACE as a natural experiment, we show that dealer profits are unconditionally lower when trade prices are disseminated. However, conditional on facing a customer imbalance, dealers perform better when trades are published because they can use that information to adjust prices more quickly to their future level. We provide evidence that prices are less informative after TRACE, consistent with price transparency reducing incentives for informed traders to participate in the market.


Michael Schwert is an Assistant Professor of Finance at the Wharton School of the University of Pennsylvania. His research focuses on frictions in the debt markets and their effects on asset prices and the behavior of borrowers and lenders. He received his PhD from Stanford Graduate School of Business.

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