Firm Characteristics and Informed Trading: Implications for Asset Pricing


Soeren Hvidkjaer
  • Speaker
Copenhagen Business School, University of Copenhagen

Event Information

Type
Research Seminar
Programme
Finance
Date
Tue. 16 Jun. 2009
Contact
Time
15:30-17:00 hours
E-mail
Location
T3-42
Number


Abstract

 

This paper investigates the linkage of microstructure, accounting, and asset pricing. We determine the relationship between firm characteristics as captured by accounting and market data and a firm’s probability of private information-based trade (PIN) as estimated from trade data. This allows us to determine what types of firms have high information risk. We then use these data to create an instrument for PIN, the PPIN, which we can estimate from firm-specific data. We show that PPINs have explanatory power for the cross-section of asset returns in long sample tests. We also investigate whether information risk vitiates the influence of other variables on asset returns. Our results provide strong support for information risk affecting asset returns, and suggest that PIN weakens, but does not remove, the role of size in asset returns.
 
The Erasmus Finance Seminar is jointly sponsored by ERIM and the Tinbergen Institute.
 
Contact information:
Viorel Roscovan
Email

 

Viorel Roscovan
Viorel Roscovan
  • Coordinator