Abstract
This paper investigates the influence of information asymmetry on the cross-sectional variation of volume-return relation. We find that the dynamic volume-return relation within medium-size trades has the most significant response to the degree of information asymmetry. We also show that the effect of information asymmetry on the volume-return dynamics migrates to small-size trades in recent years, especially in larger stocks. These results are consistent with the notion that informed traders prefer medium-size trades and this preference has shifted to small-size trades. Our findings highlight the importance of incorporating informed traders trade-size decision in the examination of the dynamic volume-return relation.
Original language | English |
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Pages (from-to) | 539 - 564 |
Number of pages | 26 |
Journal | The Financial Review |
Volume | 49 |
Issue number | 3 |
DOIs | |
Publication status | Published - 2014 |