Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/9592
Title: The impact of informed trading on corporate liquidity
Authors: Brockman, P
Chung, DY
Keywords: Informed trading
Liquidity
Stock exchange of Hong Kong
Issue Date: 2002
Source: Journal of multinational financial management, 2002, v. 12, no. 3, p. 239-259 How to cite?
Journal: Journal of Multinational Financial Management 
Abstract: The purpose of this paper is to analyze the impact of informed trading on corporate liquidity. Although theory posits an inverse relation between informed trading and firm liquidity, there is relatively little evidence on precisely how this relation is established or maintained. The trading model of Easley et al. (J. Finance 51 (1996) 1405) is employed to estimate the probability of informed trading and to identify specific days of informed trading using posterior probabilities. The results show that corporate liquidity, both in terms of spreads and depths, is a decreasing function of the probability of informed trading. The main finding is that spreads narrow and depths increase on actual information days even after controlling for variations in price, volume, and volatility.
URI: http://hdl.handle.net/10397/9592
ISSN: 1042-444X
DOI: 10.1016/S1042-444X(01)00053-6
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