The relationship between the frequency of news release and the information asymmetry: The role of uninformed trading

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dc.contributor.authorSankaraguruswamy, S.
dc.contributor.authorShen, J.
dc.contributor.authorYamada, T.
dc.date.issued2013
dc.description.abstractThis paper shows that the degree of information asymmetry is lower for firms with more frequent news releases. The relation holds for various measures of information asymmetry such as the probability of information-based trading (. PIN), permanent price impact, and adverse selection component of bid-ask spread, even after adjusting for endogeneity between news release and information asymmetry. By decomposing the PIN into intensities of uninformed and informed trades, similarly to Brown and Hillegeist (2007), we find that intensity of uninformed trading increases much more than that of informed trading for firms with more frequent news releases. As a result, information asymmetry, as is measured by PIN, decreases for such firms due to the large increase in the intensity of uninformed trading. Our findings highlight not only the importance of news releases in leveling the playing field of investors but also the role of uninformed investors in reducing trading cost due to information asymmetry. © 2013 Elsevier B.V..
dc.description.statementofresponsibilitySrinivasan Sankaraguruswamy, Jianfeng Shen, Takeshi Yamada
dc.identifier.citationJournal of Banking and Finance, 2013; 37(11):4134-4143
dc.identifier.doi10.1016/j.jbankfin.2013.07.026
dc.identifier.issn0378-4266
dc.identifier.issn1872-6372
dc.identifier.urihttp://hdl.handle.net/2440/79769
dc.language.isoen
dc.publisherElsevier Science BV
dc.rights© 2013 Elsevier B.V. All rights reserved
dc.source.urihttps://doi.org/10.1016/j.jbankfin.2013.07.026
dc.subjectNews release
dc.subjectInformation asymmetry
dc.subjectPIN
dc.subjectUninformed trading
dc.titleThe relationship between the frequency of news release and the information asymmetry: The role of uninformed trading
dc.typeJournal article
pubs.publication-statusPublished

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