Information Asymmetry, Trade Size, and the Dynamic Volume‐Return Relation: Evidence from the Australian Securities Exchange

26 Pages Posted: 26 Jul 2014

See all articles by Yang Sun

Yang Sun

University of South Australia

Huu Nhan Duong

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Harminder Singh

Deakin University - School of Accounting, Economics and Finance

Date Written: August 2014

Abstract

This paper investigates the influence of information asymmetry on the cross‐sectional variation of volume‐return relation. We find that the dynamic volume‐return relation within medium‐size trades has the most significant response to the degree of information asymmetry. We also show that the effect of information asymmetry on the volume‐return dynamics migrates to small‐size trades in recent years, especially in larger stocks. These results are consistent with the notion that informed traders prefer medium‐size trades and this preference has shifted to small‐size trades. Our findings highlight the importance of incorporating informed traders’ trade‐size decision in the examination of the dynamic volume‐return relation.

Keywords: trade size, information asymmetry, volume‐return relation

JEL Classification: G10, G20, G24

Suggested Citation

Sun, Yang and Duong, Huu Nhan and Singh, Harminder, Information Asymmetry, Trade Size, and the Dynamic Volume‐Return Relation: Evidence from the Australian Securities Exchange (August 2014). Financial Review, Vol. 49, Issue 3, pp. 539-564, 2014, Available at SSRN: https://ssrn.com/abstract=2472195 or http://dx.doi.org/10.1111/fire.12048

Yang Sun

University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia

Huu Nhan Duong

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Harminder Singh (Contact Author)

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

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