Liquidity Cost, Information Cost And Information Asymmetric

This paper explores the information role of recommendation report at an intraday frequency.We examine the change of information and liquidation cost before and after the announcement of recommendation using MRR model and,we have been able to demonstrate that there is a significant change before and after the announcement.Furthermore,we find that signed direction of transaction are highly correlated and can be used to detect the information asymmetric effectively.Other than the model analysis, we conduct the event study at the intraday frequency.The magnitude and pattern of pre-announcement market adjusted return is more pronounced than the post-announcement,indicating that there exists information leakage before the announcement.For upgrades,there are significant positive market-adjusted returns lasting 20 minutes;for downgrades, there are significant negative market-adjusted returns lasting 25 to 35 minutes.Furthermore,the dramatic rise in trading activity coupled with a shift in order imbalances implies that the market interprets recommendations with recommendation report broadly as a liquidity event. The increase in trading volume and trading value both lend strong support to the point that the recommendation report has a great impact on the liquidity.