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

Abstract

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Do News Improve Liquidity Through Improved Information or Visibility? Evidence from Emerging Markets

“…This paper contributes to two strands of the literature. On the one hand, it provides evidence in an international context of the relation between information, visibility and liquidity, so far mostly focused on US markets (Blankespoor, Miller, and White 2013;Butler, Grullon, and Weston 2005;Grullon, Kanatas, and Weston 2004;Riordan et al 2013;Sankaraguruswamy, Shen, and Yamada 2013). On the other hand, the results contribute to a better understanding of the drivers of liquidity on emerging markets.…”

“…Krinsky and Lee (1996) show that both bid-ask spreads and asymmetric information increases around merger announcements. On the other hand, the information incorporated in new releases should attract a larger pool of uninformed traders, that offset a possible increase in informed trading activity, as in (Blankespoor, Miller, and White 2013;Sankaraguruswamy, Shen, and Yamada 2013). Tetlock (2010) provides supportive evidence of informed trading appearing before the news, news alleviating asymmetric information, and then uninformed traders trading after the new release.…”

Adoption of international financial reporting standards and the cost of adverse selection

“…For example, Sankaraguruswamy et al . () find that an increase in the number of news releases tends to reduce the probability of informed trade. Similarly, Brown et al .…”

Liquidity Spillover Effects of Equity Offerings Over Dual-Class Shares

“…Also, as the matched share is not likely to be affected by the equity offering, we expect  to be not statistically significant. Following the literature (Chung, Elder, & Kim, 2010;Grullon, Kanatas, & Weston, 2004;Kryzanowski et al, 2010;Rhee & Wang, 2009;Sankaraguruswamy, Shen, & Yamada, 2013), we use the following stock-month control variables: volume traded (in logs), for which we expect a negative sign (higher liquidity); volatility, which should have a positive sign; return, which should have a negative sign; and price (in logs) which we expect to have a negative sign. Table 3 presents the main results of the regression analysis of the model.…”