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Liquidity, Information, and Infrequently Traded Stocks
Abstract
This article investigates whether differences in information‐based trading can explain observed differences in spreads for active and infrequently traded stocks. Using a new empirical technique, we estimate the risk of information‐based trading for a sample of New York Stock Exchange (NYSE) listed stocks. We use the information in trade data to determine how frequently new information occurs, the composition of trading when it does, and the depth of the market for different volume‐decile stocks. Our most important empirical result is that the probability of information‐based trading is lower for high volume stocks. Using regressions, we provide evidence of the economic importance of information‐based trading on spreads.
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Citations
Cited by
The Economic Consequences of Increased Disclosure
Leuz, C., & Verrecchia, R. E. (2000) · Journal of Accounting Research · doi:10.2307/2672910 · Cited by 2,370
The Economic Consequences of Increased Disclosure
Leuz, C., & Verrecchia, R. E. (1999) · SSRN Electronic Journal · doi:10.2139/ssrn.171975 · Cited by 2,101
Liquidity and stock returns: An alternative test
Datar, V. T., Y. Naik, N., & Radcliffe, R. (1998) · Journal of Financial Markets · doi:10.1016/s1386-4181(97)00004-9 · Cited by 1,312
The illusory nature of momentum profits
Lesmond, D. A., Schill, M. J., & Zhou, C. (2004) · Journal of Financial Economics · doi:10.1016/s0304-405x(03)00206-x · Cited by 657
Shaping Liquidity: On the Causal Effects of Voluntary Disclosure
BALAKRISHNAN, K., BILLINGS, M. B., KELLY, B., & LJUNGQVIST, A. (2014) · The Journal of Finance · doi:10.1111/jofi.12180 · Cited by 616
Metadata
- Authors
- EASLEY, D., KIEFER, N. M., O'HARA, M., & PAPERMAN, J. B.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1996-09
- Volume
- 51
- Issue
- 4
- Pages
- 1405-1436
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2100746131
- Cited by
- 1,588
- References
- 0
- FWCI
- 27.95
- Type
- journal article
- Language
- en
- Open access
- closed
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- EASLEY, D., KIEFER, N. M., O'HARA, M., & PAPERMAN, J. B. (1996). Liquidity, Information, and Infrequently Traded Stocks. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.1996.tb04074.x
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
