Information Asymmetry & Illiquidity Indexes

I construct the indexes from several adverse selection and illiquidity measures developed by the microstructure strictures from low-frequency data.

The indexes were employed in ourpaper “Dividend Hibernation and Future Earnings: When No Dividend News Is Good News”.

The primary constituents of information asymmetry index (INF) are five low-frequency measures of adverse selection :

•  Absolute bid-ask spread 

• The percent quoted spread

• Average effective bid-ask spread

• Abdi & Ranaldo Bid-Ask Spreads

• Corwin & Schultz High-Low 

I construct an illiquidity index that includes:

• Amihud illiquidity Ratio

• Amivest illiquidity Ratio 

• Zero-return proportion

• The number of analyst following the firm 

I estimate the measures for each firm i at quarter t, therefore the index has a reach cross-sectional, as well as long time-series attributes. Then, the indexes are the first principal component of the index constituents.

The index data are available upon request at quarterly and yearly frequencies for all non-industrial firms listed in NYSE/AMEX and NASDAQ for the period 1972-2017.  

Send an email to Bardia Khorsand.