Why does public news augment information asymmetries?

• 成果类型: Article
• 署名作者: Crego, Julio A.
• 署名单位: Tilburg University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.05.020
• 发表日期: 2020
• 页码: 72-89
• 关键词: public information; News release; asymmetric information; liquidity

摘要

The arrival of a public signal worsens the adverse selection problem if informed investors are risk averse. Precisely, the public signal reduces uncertainty which boosts informed investors' participation leading to a more toxic order flow. I confirm the model's empirical predictions by estimating the effect of the publication of the weekly change in oil inventories on liquidity via a difference-in-differences strategy. The bid-ask spread of stocks related to oil doubles after the release and their volume increases by 32% regardless of the report's surprise. Further, consistent with the model, implied volatility drops and insider's trading increases after the report's publication. (C) 2020 Elsevier B.V. All rights reserved.