Information Asymmetry and Trading Volume

Posted: 13 Jul 1998

See all articles by Sanjai Bhagat

Sanjai Bhagat

University of Colorado at Boulder - Department of Finance

Sanjiv Bhatia

Association for Investment Management and Research

Date Written: October 1995

Abstract

This paper examines trading volume reaction to initiations of open market share repurchases. We observe no change in trading volume for repurchases announced immediately after the October 1987 stock market crash. In contrast, we find astrong announcement period volume reaction for a sample of firms that announced repurchases during "normal" periods. Using variation in analysts' earnings per share as a proxy for quality of information, we document the following: Trading volume is inversely proportional to the quality of preannouncement information. Second, market value is also inversely proportional to the quality of information about the firm.

JEL Classification: G14

Suggested Citation

Bhagat, Sanjai and Bhatia, Sanjiv, Information Asymmetry and Trading Volume (October 1995 ). Available at SSRN: https://ssrn.com/abstract=7076

Sanjai Bhagat (Contact Author)

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States
303-492-7821 (Phone)

Sanjiv Bhatia

Association for Investment Management and Research ( email )

915 East High Street
Charlottesville, VA 22902
United States

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