Anonymity and Informed Trading

37 Pages Posted: 22 Aug 2010 Last revised: 23 Nov 2010

See all articles by Michael J. Aitken

Michael J. Aitken

Macquarie Graduate School of Management

Amy Kwan

The University of New South Wales

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics

Date Written: October 31, 2010

Abstract

We examine the trading behaviour of informed traders before and after the removal of broker identifiers on the Australian Stock Exchange on 28 November 2005. Informed traders have a preference for anonymous markets as they are less subject to follow-on trading by uninformed traders. We study trading at the time of price-sensitive announcements, which correspond to events of high information asymmetry. We proxy for informed trading using pre-announcement CARs and PIN and report an increase in informed trading after the switch to greater anonymity. The increase in informed trading is confined to larger, more liquid securities.

Keywords: Anonymity, Informed Trading, PIN

JEL Classification: G14, G15

Suggested Citation

Aitken, Michael J. and Kwan, Amy and McInish, Thomas H., Anonymity and Informed Trading (October 31, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1663212 or http://dx.doi.org/10.2139/ssrn.1663212

Michael J. Aitken

Macquarie Graduate School of Management ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Amy Kwan (Contact Author)

The University of New South Wales ( email )

Sydney, NSW 2052
Australia
+61280884259 (Phone)

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States
901-678-4662 (Phone)
901-678-3006 (Fax)

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