The Impact of Regulation Fair Disclosure on Information Asymmetry and Trading: An Intraday Analysis
38 Pages Posted: 4 May 2009 Last revised: 12 Nov 2013
Date Written: December 2004
This study examines the impact of Regulation Fair Disclosure (FD) on liquidity, information asymmetry, and institutional and retail investors trading behavior. Our main findings suggest three conclusions. First, Regulation FD has been effective in improving liquidity and in decreasing the level of information asymmetry. Second, retail trading activity increases dramatically after earnings announcements, but there is a significant decline in institutional trading surrounding earnings announcements, particularly in the pre-announcement period. Last, the decline in information asymmetry around earnings announcements is closely associated with a lower participation rate in the pre-announcement period and more active trading of retail investors after earnings releases.
Keywords: Regulation fair disclosure, volatility, liquidity, adverse selection costs
JEL Classification: G30, G34
Suggested Citation: Suggested Citation