Anonymity and Informed Trading
37 Pages Posted: 22 Aug 2010 Last revised: 23 Nov 2010
Date Written: October 31, 2010
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: Suggested Citation