Asymmetric information and the distribution of trading volume
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A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
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en
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20
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Journal of Corporate Finance, Volume 82
Abstract
We propose the Volume Coefficient of Variation (VCV), the ratio of the standard deviation to the mean of trading volume, as a new and simple measure of information asymmetry in security markets. We use a microstructure model to demonstrate that VCV is strictly increasing in the proportion of informed trade. Empirically, we obtain VCV from daily observations of trading volume and provide extensive evidence supporting the hypothesis that VCV indicates information asymmetry, by studying return reversals, institutional ownership, and extant firm-level measures of asymmetric information in the cross-section of US stocks. Moreover, VCV increases following exogenous reductions in analyst coverage induced by brokerage closures, and steeply decreases around earnings announcements and other information disclosures.Description
Funding Information: ☆ We thank an anonymous referee, Anna Bayona, Alex Boulatov, Darwin Choi, Jaewon Choi, Tarun Chordia, Jonathan Cohn, David Easley, Eliezer Fich, Carlos Forner Rodríguez, Thierry Foucault, Bruce Grundy, Alex Gümbel, Sam Hartzmark, Henry Jarva, Dirk Jenter, Pete Kyle, Albert Menkveld, Anna Obizhaeva, Deniz Okat, Conall O'Sullivan, Paolo Pasquariello, Jillian Popadak, Jorg Prokop, David Reiffen, Dagfinn Rime, Francesco Sangiorgi, Enrique Sentana, Andriy Shkilko, Valeri Sokolovski, Sorin Sorescu, Erik Theissen, Ian Tonks, Hugo van Buggenum, Michael Weber, Christian Westheide and participants at the ABFER, CEPR and CUHK Annual Symposium (Hong Kong), the American Economic Association (Chicago), the Eastern Finance Association (Philadelphia), the EBC network, the French Finance Association, the Future of Financial Information conference, the German Finance Association, the SAFE Market Microstructure Conference, the SFM conference (Kaohsiung, Taiwan), the Spanish Finance Association, Aalto University, the Bank of England, the Bank of Finland, Erasmus University Rotterdam, the Higher School of Economics, Hong Kong Baptist University, University of Amsterdam, University of Liverpool, University of Maastricht, University of Toulouse, University of Turku, and VU Amsterdam for constructive comments. We thank Fabian Brunner and Nikolas Breikopf for help with the EDGAR data. Publisher Copyright: © 2023 The Authors
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Lof, M & van Bommel, J 2023, 'Asymmetric information and the distribution of trading volume', Journal of Corporate Finance, vol. 82, 102464. https://doi.org/10.1016/j.jcorpfin.2023.102464