Information Asymmetry and Trading Volume
Posted: 13 Jul 1998
Date Written: October 1995
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: Suggested Citation