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Is Information Risk Priced? Evidence from the Price Discovery of Large Trades

Is Information Risk Priced? Evidence from the Price Discovery of Large Trades. Discussed by Yi-Tsung Lee NCCU. Brief Summary. By using VECM, this paper develops an information risk measure ECIN based on the price discovery of large trades.

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Is Information Risk Priced? Evidence from the Price Discovery of Large Trades

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  1. Is Information Risk Priced? Evidence from the Price Discovery of Large Trades Discussed by Yi-Tsung Lee NCCU

  2. Brief Summary • By using VECM, this paper develops an information risk measure ECIN based on the price discovery of large trades. • This paper tries to provide evidences on the pricing impact, robust check,…and so on. • The authors claim that ECIN dominates PIN in asset pricing test and that the pricing impact of ECIN is robust after controlling illiquidity effects.

  3. Two Suggestions • Does ECIN really dominate PIN? 2. How about the behavior pattern of ECIN around M&A events, …?

  4. 1. Does ECIN really dominate PIN?

  5. JA-test • Developed by Fisher and McAleer (1981, JE) • To determine whether ECIN or PIN is more associated with stock return

  6. 2. How about the behavior pattern of ECIN around M&A events, …? Aktas et al. (2007) find that for M&A announcement the behavior of PIN is inconsistent with the evidence of information leakages during the pre-event period.

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