活動

Finance Seminar

Authors:

• James J. Choi
  Yale School of Management

• Li Jin
  Oxford University Saïd Business School

• Hongjun Yan
  Yale School of Management

Does asymmetric information affect a stock's expected return? Using stock-level daily institutional ownership percentage data from the Shanghai Stock Exchange, we first show that institutions have a strong information advantage when they trade. We then show that stocks in which institutions' trading profits during the past year were in the top quintile outperform bottom-quintile stocks by 6.6% per year going forward, consistent with increasing information asymmetry raising the cost of capital. Past institutional trading profits predict future returns more strongly in stocks where institutional trading profitability is more persistent.