Liquidity, Information, and Infrequently Traded Stocks
Cornell University - Department of Economics
Nicholas M. Kiefer
Cornell University - Samuel Curtis Johnson Graduate School of Management
Joseph B. Paperman
J. OF FINANCE, Vol. 51 No. 4, September 1996
This paper investigates whether differences in information- based trading can explain observed differences in spreads for active and infrequently traded stocks. Using a new empirical technique, we estimate the risk of information- based trading for a sample of NYSE listed stocks. We use the information in trade data to determine how frequently new information occurs, the composition of trading when it does, and the depth of the market for different volume-decile stocks. Our most important empirical result is that the probability of information-based trading is lower for high volume stocks. Using regressions, we provide evidence of the economic importance of information-based trading on spreads.
JEL Classification: G14Accepted Paper Series
Date posted: November 6, 1996
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.281 seconds