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http://ssrn.com/abstract=1334465
 
 

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Firm Characteristics and Informed Trading: Implications for Asset Pricing


Hadiye Aslan


University of Houston - C.T. Bauer School of Business

David Easley


Cornell University - Department of Economics

Soeren Hvidkjaer


Copenhagen Business School

Maureen O'Hara


Cornell University - Samuel Curtis Johnson Graduate School of Management

September 1, 2008


Abstract:     
This paper investigates the linkage of microstructure, accounting, and asset pricing. We determine the relationship between firm characteristics as captured by accounting and market data and a firm's probability of private information-based trade (PIN) as estimated from trade data. This allows us to determine what types of firms have high information risk. We then use these data to create an instrument for PIN, the PPIN, which we can estimate from firm-specific data. We show that PPINs have explanatory power for the cross-section of asset returns in long sample tests. We also investigate whether information risk vitiates the influence of other variables on asset returns. Our results provide strong support for information risk affecting asset returns, and suggest that PIN weakens, but does not remove, the role of size in asset returns.

Number of Pages in PDF File: 51

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Date posted: January 29, 2009 ; Last revised: February 10, 2009

Suggested Citation

Aslan, Hadiye and Easley, David and Hvidkjaer, Soeren and O'Hara, Maureen, Firm Characteristics and Informed Trading: Implications for Asset Pricing (September 1, 2008). Available at SSRN: http://ssrn.com/abstract=1334465 or http://dx.doi.org/10.2139/ssrn.1334465

Contact Information

Hadiye Aslan (Contact Author)
University of Houston - C.T. Bauer School of Business ( email )
Houston, TX 77204
United States
David Easley
Cornell University - Department of Economics ( email )
414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-6283 (Phone)
607-255-2818 (Fax)
Soeren Hvidkjaer
Copenhagen Business School ( email )
Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark
HOME PAGE: http://www.hvidkjaer.net
Maureen O'Hara
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
607-255-3645 (Phone)
607-255-5993 (Fax)
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References:  39
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