Do Domestic Institutional Trades Exacerbate Information Asymmetry? Evidence from the Korean Stock Market

Do Domestic Institutional Trades Exacerbate Information Asymmetry? Evidence from the Korean Stock... We analyze a trading dataset from the Korean stock market, a representative and leading emerging equity market, to study the impact of domestic institutional trades on information asymmetry. Using the bid–ask spread as a proxy for the adverse selection cost imposed by information asymmetry, we empirically examine the relationship between domestic institutional trades and their corresponding bid–ask spreads. We find that bid–ask spreads tend to increase when the trading volume of domestic institutional investors is high, suggesting that such investors tend to aggravate information asymmetry as informed traders in the Korean stock market. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Financial Markets Springer Journals

Do Domestic Institutional Trades Exacerbate Information Asymmetry? Evidence from the Korean Stock Market

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Publisher
Springer Journals
Copyright
Copyright © 2017 by Springer Japan KK, part of Springer Nature
Subject
Finance; Finance, general; Macroeconomics/Monetary Economics//Financial Economics; International Economics; Econometrics; Economic Theory/Quantitative Economics/Mathematical Methods
ISSN
1387-2834
eISSN
1573-6946
D.O.I.
10.1007/s10690-017-9235-0
Publisher site
See Article on Publisher Site

Abstract

We analyze a trading dataset from the Korean stock market, a representative and leading emerging equity market, to study the impact of domestic institutional trades on information asymmetry. Using the bid–ask spread as a proxy for the adverse selection cost imposed by information asymmetry, we empirically examine the relationship between domestic institutional trades and their corresponding bid–ask spreads. We find that bid–ask spreads tend to increase when the trading volume of domestic institutional investors is high, suggesting that such investors tend to aggravate information asymmetry as informed traders in the Korean stock market.

Journal

Asia-Pacific Financial MarketsSpringer Journals

Published: Nov 24, 2017

References

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