Is Information Risk Priced for Nasdaq-Listed Stocks?

21 Pages Posted: 11 Feb 2007

See all articles by Kathleen P. Fuller

Kathleen P. Fuller

University of Mississippi - School of Business Administration

Bonnie F. Van Ness

University of Mississippi - Department of Finance

Robert A. Van Ness

University of Mississippi - Department of Finance

Date Written: February 9, 2007

Abstract

Easley, Hvidkjaer, and O'Hara (2002), building upon the asset pricing model of Fama and French (1992), show that the probability of informed trading (PIN) is a determinant of asset returns for NYSE-listed securities. We extend this work by examining whether the PIN is a predictive factor for NASDAQ stocks, as many studies document significant differences between NYSE and NASDAQ listed securities. In the process we examine whether the use of PIN is appropriate for NASDAQ-listed securities. We find that PIN and certain stock characteristics correlate differently for our sample of NASDAQ stocks than that of Easley, Hvidkjaer, and O'Hara's sample of NYSE stocks. We also determine that the risk of informed trading is only weakly priced for NASDAQ stocks. Contrary to Easley, Hvidkjaer, and O'Hara (2002) we do not find evidence that excess returns increases as PIN increases.

Keywords: PIN, NASDAQ, Trading

JEL Classification: G14, G18

Suggested Citation

Petrie Fuller, Kathleen and Van Ness, Bonnie F. and Van Ness, Robert A., Is Information Risk Priced for Nasdaq-Listed Stocks? (February 9, 2007). Available at SSRN: https://ssrn.com/abstract=962454 or http://dx.doi.org/10.2139/ssrn.962454

Kathleen Petrie Fuller

University of Mississippi - School of Business Administration ( email )

PO Box 3986
Oxford, MS 38677
United States

Bonnie F. Van Ness

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States
662-915-6749 (Phone)
662-915-7968 (Fax)

Robert A. Van Ness (Contact Author)

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States

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