Abstract
This paper finds that in Nasdaq Helsinki where brokers can voluntarily reveal or conceal identities, unsophisticated traders are less willing to trade after anonymous trades than non-anonymous trades. Using intraday order and trade data of large-cap stocks to which the voluntary anonymity model applies, I find that on earnings announcement days, before announcements, the duration-until-next-unsophisticated-order (DUNUO)—a novel unsophisticated liquidity measure—following an anonymous trade is 21 seconds longer than that following a non-anonymous trade. However, this difference reduces to 8 seconds when earnings information is disclosed, implying a reduction in the negative impact of anonymity caused by lower information asymmetry. Moreover, unsophisticated traders are found to be increasingly unwilling to trade as the degree of anonymity—whether the preceding trade is non-, half-, or fully anonymous—increases.
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