Informed trading, order flow shocks and the cross section of expected returns in Borsa Istanbul

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Tinic M., Salih A.

APPLIED ECONOMICS, cilt.52, sa.13, ss.1446-1459, 2019 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 52 Sayı: 13
  • Basım Tarihi: 2019
  • Doi Numarası: 10.1080/00036846.2019.1676386
  • Dergi Adı: APPLIED ECONOMICS
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.1446-1459
  • Anahtar Kelimeler: Information asymmetry, market microstructure, borsa istanbul, asset pricing, STOCK RETURNS, INFORMATION, PROBABILITY, RISK, COST
  • TED Üniversitesi Adresli: Evet

Özet

This paper examines the relationship between information asymmetry and stock returns in Borsa Istanbul. For all stocks that are traded in Borsa Istanbul between March 2005 and April 2017, we estimate the probability of informed trading (PIN) to proxy for information asymmetry.? Firm-level cross-sectional regressions indicate a statistically insignificant relationship between PIN estimates and future returns. Moreover, univariate and multivariate portfolio analyses assert that investors that hold stocks that have high information asymmetry do not obtain significant future returns. Consequently, our results suggest that information asymmetry proxied by PIN is a firm-specific risk and can be eliminated with portfolio diversification. Findings are robust to different factorizations in estimating PIN and free of any bias due to trade classification algorithms, boundary solutions, floating-point exceptions and symmetric?order flow shocks.