Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The Noninformation Cost of Trading and Its Relative Importance in Asset Pricing

The Noninformation Cost of Trading and Its Relative Importance in Asset Pricing AbstractWe show that the noninformation component of trading costs is priced in thecross-section of stock returns using intraday data for NYSE/AMEX stocks. Moreimportantly, we show that the noninformation component is much larger and morestrongly related to stock returns than is the adverse-selection component,indicating that the noninformation component plays a more important role inasset pricing than does the adverse-section component. We conduct a variety ofrobustness tests and show that our main results hold for different estimationmethods, measures of the adverse-selection cost, subsample periods, and controlvariables. We offer plausible explanations for these results.Received December 27, 2014; accepted January 11, 2016 by Editor MaureenO’Hara. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Asset Pricing Studies Oxford University Press

The Noninformation Cost of Trading and Its Relative Importance in Asset Pricing

Loading next page...
 
/lp/oxford-university-press/the-noninformation-cost-of-trading-and-its-relative-importance-in-pJcq67q1zl

References (0)

References for this paper are not available at this time. We will be adding them shortly, thank you for your patience.

Publisher
Oxford University Press
Copyright
© The Author 2016. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oup.com
ISSN
2045-9920
eISSN
2045-9939
DOI
10.1093/rapstu/raw003
Publisher site
See Article on Publisher Site

Abstract

AbstractWe show that the noninformation component of trading costs is priced in thecross-section of stock returns using intraday data for NYSE/AMEX stocks. Moreimportantly, we show that the noninformation component is much larger and morestrongly related to stock returns than is the adverse-selection component,indicating that the noninformation component plays a more important role inasset pricing than does the adverse-section component. We conduct a variety ofrobustness tests and show that our main results hold for different estimationmethods, measures of the adverse-selection cost, subsample periods, and controlvariables. We offer plausible explanations for these results.Received December 27, 2014; accepted January 11, 2016 by Editor MaureenO’Hara.

Journal

The Review of Asset Pricing StudiesOxford University Press

Published: Dec 1, 2016

There are no references for this article.