Private Information Trading and Corporate Governance in Emerging Markets
38 Pages Posted: 5 Nov 2008
Date Written: October 2002
We apply the theoretical framework of Llorente, Michaely, Saar, and Wang(2002) to analyze the relation between daily volume and first-order return autocorrelationfor individual stocks in emerging markets. We find strong evidence of return continuation following high volume days, suggesting the presence of private information trading formany emerging market stocks. We discover that private information trading is especially strong around major corporate event dates. In addition, we find stocks that provide better investor protection and information disclosure exhibit less private information trading.These results suggest return autocorrelation and trading volume carry useful informationabout corporate governance in emerging market.
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