If the financial crisis has done anything good, it has focused experts' attention on two key factors influencing values of complex securities: transparency, the amount of information available about a security; and liquidity, the ability to easily find a buyer or seller for a given issue.
Nearly everyone agrees that pumping more information into the marketplace and making trading more active allows prices to better reflect supply and demand. But it's not entirely clear how much transparency and liquidity it takes to make markets work well, or just how these two factors affect one another. Nor is it clear whether it's possible to have too much of either, whether the credit-rating agencies are really improving transparency, or whether the two factors influence all markets the same way.
See full Article.
Posts
