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Retail investor attention and information asymmetry: Evidence from China

Xing Chen and Chongfeng Wu

Pacific-Basin Finance Journal, 2022, vol. 75, issue C

Abstract: We investigate the presence of information asymmetry costs in the Chinese stock market based on three order-related proxies. We find that order imbalance volatility has stronger predictive power and captures information asymmetry more comprehensively than traditional measures. Then, we test the association between retail investor attention and firms’ information asymmetry. The adverse selection problem can be alleviated but not completely solved with the increase of retail investor attention. It can facilitate the interpretation of publicly available information, but may not be effective in resolving information asymmetry due to insider trades. Furthermore, retail investor attention shows stronger effect on lowering information asymmetry for firms with fewer inside trades and better public information environment.

Keywords: Investor attention; Information asymmetry; Cross-section of stock returns; Asset pricing; Order imbalance (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:75:y:2022:i:c:s0927538x22001421

DOI: 10.1016/j.pacfin.2022.101847

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