تقاضای اطلاعات و نقدینگی بازار سهام: شواهد بین المللی Information demand and stock market liquidity: International evidence

1. Introduction According to recent research, factors such as information asymmetry and idiosyncratic risk are likely to be relevant for determining trading activity levels. Particularly, several research studies on stock markets have investigated the issue of liquidity under information asymmetry (Admati and Pfleiderer, 1988; Easley et al., 1996; Kyle, 1985; Li and Wu, 2006). Actually, illiquidity is primarily caused by asymmetric information (Akerlof, 1970; Bagehot, 1971). To reduce the cost arising from information asymmetry, investors naturally demand more information before making financial decisions (Drake et al., 2012; Peng and Xiong, 2006; Vlastakis and Markellos, 2012). Thus, information demand increases with information asymmetry from the perspective of investor rationality. In response to such information demand, firms attempt to improve the quality of information disclosure in the hope of reducing information asymmetry, and in turn improving trading activity. The present paper proposes investor demand for information as a determinant of stock liquidity. In particular, relying on international data, we provide original evidence that information demand, as proxied by Google research volume (GSV), tends to be positively associated with liquidity. Apart from this basic relationship, we rely on previous theories and empirical findings (Brandt and Kavajecz, 2004; Green, 2006; Grullon et al., 2004) and suggest more specific mechanisms for how the link between information demand and stock liquidity might work. First, we control for firm visibility proxied by advertising expenditures, firm size and stock performance. Interestingly, we find that information demand reduces information asymmetry, but only for low-visibility firms, while the relationship becomes weaker for high-visibility firms. Then, we split our sample with respect to information asymmetry levels, as proxied by quoted spread, stock volatility and analysts’ forecasts dispersion. We find that information demand and stock liquidity are positively related only for high information asymmetry firms.