Download or read book Information Asymmetry Liquidity and Stock Returns written by Sanders Chang and published by . This book was released on 2015 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a new measure for the probability of informed trading, called PCP. Using double-sorted portfolios, we find that excess returns increase from low to high PCP portfolios. In regression analysis, the effect of PCP on returns is significantly positive after controlling for illiquidity effect. The point estimate of the coefficient on one PCP is 3.788, suggesting that a difference of 10 percentage points in the PCP between two stocks leads to a difference in expected returns of 4.5 percent annually. Thus, the effect is also economically significant. Our results support the information asymmetry hypothesis that information risk is priced.

Download or read book Liquidity Information Asymmetry Divergence of Opinion and Asset Returns written by Guangchuan Li and published by . This book was released on 2008 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the independent and dominating effects of the liquidity level, the information asymmetry and the divergence of opinion on asset returns in an important emerging market, Chinese stock market. We use the variable ILLIQ from Amihud (2002) to proxy for the liquidity level, the variable PIN from Easley, Hvidkjaer, and O'Hara (2002) to proxy for the information asymmetry and the variable OBS based on Naes and Skjeltorp (2006) to proxy for the divergence of opinion. We find striking evidence that stocks with a higher liquidity level, or a lower information asymmetry, or a lower divergence of opinion, experience significantly lower excess returns. More importantly, the explanatory power of the liquidity level on asset returns may only reflect those from either the information asymmetry or the divergence of opinion. Moreover, we find no evidence on the dominating effect between the information asymmetry and the divergence of opinion when examining their impact on asset returns. These further findings verify the fact that the information asymmetry and the divergence of opinion both affect the liquidity level and meanwhile, the asymmetric information seems only partly to explain the dispersed beliefs among investors in Chinese stock market.

Download or read book Asymmetric Information Corporate Finance and Investment written by R. Glenn Hubbard and published by University of Chicago Press. This book was released on 2009-05-15 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.

Download or read book Option Implied Liquidity and Stock Returns written by Minh Nguyen and published by . This book was released on 2019 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines a market-wide liquidity measure based on the systematic deviations from Put-Call parity in the U.S. equity option markets. We show that this implied liquidity measure provides forward-looking information about market returns and significantly explains the cross-sectional variations of stock returns. We show that investing in the stocks with the largest exposure to the innovations in the implied liquidity and shorting the stocks with the smallest generate significant returns of about 7.3 percent per annum. The explanatory power of implied liquidity for the cross-sectional variations of stock returns remain robust after controlling for various liquidity influences, the short-selling constraints and the effects of information asymmetry.

Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.

Download or read book Innovative Mobile and Internet Services in Ubiquitous Computing written by Leonard Barolli and published by Springer Nature. This book was released on 2020-06-09 with total page 667 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents the latest research findings, methods and development techniques, challenges and solutions concerning UPC from both theoretical and practical perspectives, with an emphasis on innovative, mobile and Internet services. With the proliferation of wireless technologies and electronic devices, there is a rapidly growing interest in Ubiquitous and Pervasive Computing (UPC), which makes it possible to create a human-oriented computing environment in which computer chips are embedded in everyday objects and interact with the physical world. Through UPC, people can go online even while moving around, thus enjoying nearly permanent access to their preferred services. Though it has the potential to revolutionize our lives, UPC also poses a number of new research challenges.

Download or read book Information Asymmetry in Stock Trading Economic and Financial Characteristics and Corporate Governance in the Brazilian Stock Market written by Orleans Silva Martins and published by . This book was released on 2014 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study sought to investigate the relationship between information asymmetry in the stock trading, economic and financial characteristics and corporate governance of listed companies in the Brazilian stock market in 2010 and 2011. To this end, the study relied on a theoretical framework for information asymmetry in the capital market to measure the asymmetry's magnitude based on the intraday stock-trading data of 194 companies. The primary results demonstrated that the informational asymmetry in the stock trading was positively related to the risk, return and liquidity of the shares as well as the cost of equity and the size of the companies. In addition, the asymmetry was negatively related to the abnormal return of shares. During the investigated period, the information asymmetry relationship with the liquidity and size (positive) and the abnormal return (negative) were at odds with previous research. The reasons for our results may be related to specific aspects of the Brazilian market, for example, in the case of abnormal returns, the deceleration of the Bovespa Index (IBovespa) or the reflection of the average return to negotiators without insider information during the period. In case of liquidity and size, the high index of issuance and negotiation of preferred shares may have influenced the results. Thus, this research contributes to the analysis of idiosyncratic characteristics of the capital market of a developing country, such as information asymmetry in stock trading and its association with the economic and financial characteristics and corporate governance of companies in the Brazilian stock market.

Download or read book Remedies to Informational Asymmetries in Stock Markets written by Peter-Jan Engelen and published by Intersentia nv. This book was released on 2005 with total page 4 pages. Available in PDF, EPUB and Kindle. Book excerpt: Like many other markets, stock markets are characterised by asymmetric information. If investors cannot distinguish high-quality from low-quality securities, they will value all securities as average resulting in the well known market for lemons. This decreases the allocative efficiency and social welfare by guiding resources to the least good investment opportunities. How can high-quality listed companies communicate with stock markets to distinguish themselves from low-quality listed companies? Although proponents of mandatory disclosure rules in securities markets will answer this question with far-reaching governmental regulation, it is jumping to conclusions and skipping devices that signal the true quality of the investment opportunities to the stock market. This book analyses the functioning of stock markets, in particular the dissemination of price-sensitive information on these markets. In order to evaluate the legal rules governing the dissemination of information from an economic perspective, an operational framework is needed to assess the current disclosure regulation with respect to allocative efficiency. The book replaces vague legal goals of securities regulation, such as investors' protection, by financial economic concepts, such as market efficiency and market liquidity. To enhance allocative efficiency, the book analyses the relevancy of mandatory disclosure rules, the use of trading halts in disseminating information during the opening hours of a stock exchange, the use of selective disclosure and the regulation of insider trading.

Download or read book Dynamic Information Acquisition Comlementarity and Market Liquidity written by Zhifeng Cai and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies dynamic information acquisition in financial markets with information asymmetry. It first shows that multiplicity can arise in the information market due to a dynamic complementarity in information acquisition. It then characterizes interactions between information complementarity and market liquidity, in particular how market liquidity shapes information complimentarity through the liquidity component in future stock returns. I find that i)information complementarity is always more prominent in low-volatility financial market equilibrium; ii) information complementarity can be more prominent with less persistent stock fundamental and/or more persistent stock supply and iii) regardless of the type of financial market equilibrium, public disclosure always makes information complementarity less prominent.

Download or read book Market Liquidity written by Thierry Foucault and published by Oxford University Press. This book was released on 2023 with total page 531 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The process by which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on this process. The book starts from the assumption that not everyone is present at all times simultaneously on the market, and that participants have quite diverse information about the security's fundamentals. As a result, the order flow is a complex mix of information and noise, and a consensus price only emerges gradually over time as the trading process evolves and the participants interpret the actions of other traders. Thus, a security's actual transaction price may deviate from its fundamental value, as it would be assessed by a fully informed set of investors. The book takes these deviations seriously, and explains why and how they emerge in the trading process and are eventually eliminated. The authors draw on a vast body of theoretical insights and empirical findings on security price formation that have come to form a well-defined field within financial economics known as "market microstructure." Focusing on liquidity and price discovery, the book analyzes the tension between the two, pointing out that when price-relevant information reaches the market through trading pressure rather than through a public announcement, liquidity may suffer. It also confronts many striking phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time and differs across securities, why large trades move prices up or down, and why these price changes are subsequently reversed, and why we observe temporary deviations from asset fair values"--

Download or read book Asset Pricing Under Asymmetric Information written by Markus Konrad Brunnermeier and published by Oxford University Press, USA. This book was released on 2001 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: The role of information is central to the academic debate on finance. This book provides a detailed, current survey of theoretical research into the effect on stock prices of the distribution of information, comparing and contrasting major models. It examines theoretical models that explain bubbles, technical analysis, and herding behavior. It also provides rational explanations for stock market crashes. Analyzing the implications of asymmetries in information is crucial in this area. This book provides a useful survey for graduate students.

Download or read book Effects of Information Asymmetry on Market Liquidity written by Richard Co and published by . This book was released on 2000 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Information Asymmetry Divergence of Opinions and Firm Specific Liquidity written by Mohammad Tayeh and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This research examines the relationship between firm-specific liquidity and both information asymmetry and divergence of opinion, within the context of different trading system (i.e. floor versus electronic), for UK, Swiss and German stock markets. By using both univariate and multivariate analysis, the results, in general, show that firms with low (high) levels of information asymmetry between company managers and outside investors have high (low) liquidity. However, the evidence concerning the impact of divergence of opinion among investors on liquidity is mixed. We find that divergence of opinion is positively related to all measures of liquidity during the two sub-samples periods, before and after automation. That is, while the positive relation between divergence of opinion and both proportional bid-ask spread and price impact support the risk view of divergence of opinion, the positive relation between divergence of opinion and turnover ratio supports the optimistic view. The results also show that the impact of information asymmetry and divergence of opinion on firm-specific liquidity is different across trading systems. That is, the results show that in most cases for all markets, the impact of information asymmetry (divergence of opinion) on firm-specific liquidity on floor (electronic) trading systems is lesser than that on electronic (floor) trading systems. This implies that different trading systems could affect differently the informational environment of firms, and thus affect the impact of information asymmetry and divergence of opinion on liquidity. However, after allowing for the market-wide and industry-wide information, the results show that both information asymmetry and divergence of opinion have no additional explanatory power. This implies that both market and industry factors are able to explain the cross-sectional variation in firm-specific liquidity, which puts into question the role of financial analysts and the value of the information they provide to investors in the market.

Download or read book The Behavior of Asset Return Moments with Asymmetric Information Price Taking and Risk Aversion written by Steve L. Slezak and published by . This book was released on 1992 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Liquidity and Stock Returns written by Sai-Pang Chan and published by . This book was released on 2004 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Does Information Asymmetry Matter in Emerging Markets Evidence from Six Latin American Stock Markets written by Diego A. Agudelo and published by . This book was released on 2014 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: Does informed trading affect emerging stock markets? Market microstructure literature establishes that information asymmetry reduces liquidity and moves prices in the direction of the trade. We test for this theoretical implication by running the dynamic PIN model of Easley, Engle, O'Hara y Wu (2008), for stocks of Argentina, Brazil, Chile, Colombia, Mexico and Peru. We use panel data models to test for the relation between PIN, as a measure of information asymmetry, bid-ask spreads, as a measure of liquidity, and returns. The reported results confirm the mentioned theoretical implications, the empirical validity dynamic PIN model, and contribute to a better understanding of price formation in emerging markets.

Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.