Do Prices Reveal the Presence of Informed Trading?
2012; RELX Group (Netherlands); Linguagem: Inglês
10.2139/ssrn.2121777
ISSN1556-5068
AutoresVyacheslav Fos, Pierre Collin‐Dufresne,
Tópico(s)Financial Markets and Investment Strategies
ResumoUsing a comprehensive sample of trades by Schedule 13D filers, who possess valuable private information when they accumulate stocks of targeted companies, this paper studies whether several liquidity measures reveal the presence of informed trading. The evidence suggests that when Schedule 13D filers trade aggressively, both high-frequency and low-frequency measures of stock liquidity indicate a higher stock liquidity. Importantly, measures that have been used as direct proxies for adverse selection, such Kyle (1985) lambda, Easley, Kiefer, O'Hara, and Paperman (1996) pin measure, and Amihud (2002) illiquidity measure, suggest that the adverse selection is lower when informed trading takes place. The evidence is consistent with informed traders being more aggressive when measured stock liquidity is high.
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