[We examine the effects of price disclosure on market performance in a continuous experimental multiple-dealer market in which seven professional market makers trade a single security. The dealers trade with one another and with computerized informed and liquidity traders. Our key comparison is between fully public price queues (pretrade transparent market) and bilateral quoting (pretrade opaque). We find that opening spreads are wider and trading volume is lower in the opaque markets due to higher search costs there. More importantly, however, higher search costs also induce more aggressive pricing strategies, so that price discovery is much faster in the opaque markets.]

In this paper, we develop a portfolio selection model which allocates financial assets by maximising expected return subject to the constraint that the expected maximum loss should meet the Value-at-Risk limits set by the risk manager. Similar to the mean–variance approach a performance index like the Sharpe index is constructed. Furthermore when expected returns are assumed to be normally distributed we show that the model provides almost identical results to the mean–variance approach. We provide an empirical analysis using two risky assets: US stocks and bonds. The results highlight the influence of both non-normal characteristics of the expected return distribution and the length of investment time horizon on the optimal portfolio selection.

We examine the effects of price disclosure on market performance in a continuous experimental multiple-dealer market in which seven professional market makers trade a single security. The dealers trade with one another and with computerized informed and liquidity traders. Our key comparison is between fully public price queues (pretrade transparent market) and bilateral quoting (pretrade opaque). We find that opening spreads are wider and trading volume is lower in the opaque markets due to higher search costs there. More importantly, however, higher search costs also induce more aggressive pricing strategies, so that price discovery is much faster in the opaque markets.