Is information risk priced for NASDAQ-listed stocks? |
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Authors: | Kathleen P Fuller Bonnie F Van Ness Robert A Van Ness |
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Institution: | (1) School of Business Administration, University of Mississippi, 329 Holman Hall, University, MS 38677, USA |
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Abstract: | Easley et al. (J Finance 57:2185–2221, 2002), building upon the asset pricing model of Fama and French (J Finance 47:427–465, 1992), show that the probability of informed trading (PIN) is a determinant of asset returns for NYSE-listed securities. We extend
this work by examining whether the PIN is a predictive factor for NASDAQ stocks, as many studies document significant differences
between NYSE and NASDAQ listed securities. In the process we examine whether the use of PIN is appropriate for NASDAQ-listed
securities. We find that PIN and certain stock characteristics correlate differently for our sample of NASDAQ stocks than
that of Easley et al. sample of NYSE stocks. We also determine that the risk of informed trading is only weakly priced for
NASDAQ stocks. Contrary to Easley et al. we do not find evidence that excess returns increases as PIN increases. |
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