Empirical Study of the Effects of Transparency on Liquidity in Stock Market

On Dec 8th, 2003, the rules of information disclosure of Chinese stock market we re changed, i.e. the top price levels showed in the limit order book were enlarg ed from 3 to 5, and the transparency was largely increased. The effects of trans parency on liquidity were deeply analyzed in this paper. It was found that after the increase of transparency, the liquidity was largely improved and changed fr om high to low. So the conclusion is that liquidity is much influenced by transp arency in the stock market.