The impact of individual investor trading on information asymmetry in the Korean stock market

Chune Young Chung and Kainan Wang

The North American Journal of Economics and Finance, 2016, vol. 37, issue C, 472-484

Abstract: This paper examines the impact of individual investor trading on information asymmetry in the market. In particular, we examine the relationship between the trading volume by individual investors and the corresponding bid-ask spread in the Korean stock market, where the majority of the trading activity is driven by individual investors and therefore information asymmetry can be evident. We find that high trading activity by individual investors increases the bid-ask spread in a short investment horizon, suggesting that individual investors, as uninformed and unsophisticated traders, amplify the degree of information asymmetry in the market through trading.

Keywords: Individual investor trading; Information asymmetry; Bid-ask spread; Short-term trading data; Korean stock market; Emerging market (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:37:y:2016:i:c:p:472-484

DOI: 10.1016/j.najef.2016.05.005

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