When is a firm's information asymmetry priced? The role of institutional investors

Luong, H, Nguyen, L and Yin, X 2015, 'When is a firm's information asymmetry priced? The role of institutional investors', International Review of Finance, vol. 15, no. 1, pp. 55-88.


Document type: Journal Article
Collection: Journal Articles

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Title When is a firm's information asymmetry priced? The role of institutional investors
Author(s) Luong, H
Nguyen, L
Yin, X
Year 2015
Journal name International Review of Finance
Volume number 15
Issue number 1
Start page 55
End page 88
Total pages 34
Publisher Wiley-Blackwell
Abstract This study reexamines the competing claims that probability of informed trading (PIN) is priced in the cross-section of stock returns while adjusted PIN (AdjPIN), the component of PIN related to information asymmetry, is not. We find that behind these seemingly contradicting conclusions is the role of institutional investors, and the pricing of PIN and AdjPIN depends on institutional ownership. Only for those stocks with low institutional ownership are both PIN and AdjPIN priced. Our findings imply that investors require compensation for information risk only from stocks with low institutional ownership.
Subject Finance
Keyword(s) Corporate Governance
Stock Returns
Shareholder Activism
Ownership
Liquidity
Market
Cost
Risk
Preferences
Earnings
DOI - identifier 10.1111/irfi.12038
Copyright notice © 2014 International Review of Finance Ltd
ISSN 1369-412X
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