The Noninformation Cost of Trading and Its Relative Importance inAsset Pricing

Kee H. Chung and Sahn-Wook Huh

The Review of Asset Pricing Studies, 2016, vol. 6, issue 2, 261-302

Abstract: We 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.

JEL-codes: G12 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:rasset:v:6:y:2016:i:2:p:261-302.

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