Information asymmetry, trade size, and the dynamic volume-return relation: Evidence from the Australian Securities Exchange

Yang Sun, Huu Nhan Duong, Harminder Singh

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    5 Citations (Scopus)

    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 languageEnglish
    Pages (from-to)539 - 564
    Number of pages26
    JournalThe Financial Review
    Volume49
    Issue number3
    DOIs
    Publication statusPublished - 2014

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