Is Information Risk Priced for Nasdaq-Listed Stocks?
21 Pages Posted: 11 Feb 2007
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: Suggested Citation