v I realized the importance of fellow students towards enriching graduate life. I thank my classm... more v I realized the importance of fellow students towards enriching graduate life. I thank my classmates from the economics program, Jayant Ganguli, Koralai Kirabaeva, Amit Anshumali, and Serif Aziz, for being both excellent colleagues and great friends, and for always being just a phone call away whenever I needed a second opinion. I also want to thank my classmates from the finance program, Vikrant Tyagi, William Weld, and David Pompilio, who offered key advice and answered lots of questions during the initial years of graduate school, and with whom I later had many helpful discussions. I also want to thank both Numeric Investors, LLC, and GMO, LLC, for providing me with research infrastructure to carry out much of the research in Chapter 3. Lastly, I want to thank a few of my colleagues, George Sakoulis and Kirsten Syverson at Numeric, and Tom Bok at GMO, who kept encouraging me to finish my thesis after I began work there. I also want to gratefully acknowledge the help from staff at CISER, especially Carol Murphree, for being so supportive of all my computing and data needs, and Paula Douglass for proofreading the thesis. I also want to thank Sai Maudgalya, who has been a source of constant encouragement over the last ten years. In the interest of space, I will refrain from mentioning more names but wish all the best to all my colleagues at Cornell. vi TABLE OF CONTENTS BIOGRAPHICAL SKETCH.
for their helpful comments. All remaining errors are our own. We would also like to thank Avanidh... more for their helpful comments. All remaining errors are our own. We would also like to thank Avanidhar Subrahmanyam for making the liquidity data available for NYSE stocks.
The study examines the relationship between institutional ownership and liquidity of stocks, focu... more The study examines the relationship between institutional ownership and liquidity of stocks, focusing on the effect of institutions' information advantage on liquidity. The information advantage of institutions can affect liquidity through two channels: adverse selection and information efficiency. The adverse selection effect results from an increase in information asymmetry. The information efficiency effect, however, results from an increase in competition among institutions. Competition promotes the rate at which private information is incorporated into prices, reducing uncertainty about future payoffs. I find evidence of a nonmonotonic (Ushaped) relationship between the fraction of shares of a firm held by institutions and various measures of stock liquidity. This evidence of a nonmonotonic relationship strongly suggests that the two effects coexist and interact with each other. The effect of information advantage of institutions on liquidity also varies with the amount of publicly available information and asset risk. My evidence indicates that institutional ownership (Granger) causes liquidity, allaying, to an extent, concerns that findings are a result of institutions' preference for liquid stocks. Lastly, I document that institutional investor characteristics, such as investment horizon and risk aversion, also affect liquidity. Liquidity decreases with both increases in fraction of equity held by longterm investors and risk aversion of institutional investor.
* I would like to thank Ola Bengtsson, William Christie, Yaniv Grinstein, Yelena Larkin, Roni Mic... more * I would like to thank Ola Bengtsson, William Christie, Yaniv Grinstein, Yelena Larkin, Roni Michaely, Tim Mount, Heather Tookes, Vikrant Tyagi, Bill Weld, seminar participants at Cornell University, and especially Maureen O'Hara and Gideon Saar for very helpful discussions ...
v I realized the importance of fellow students towards enriching graduate life. I thank my classm... more v I realized the importance of fellow students towards enriching graduate life. I thank my classmates from the economics program, Jayant Ganguli, Koralai Kirabaeva, Amit Anshumali, and Serif Aziz, for being both excellent colleagues and great friends, and for always being just a phone call away whenever I needed a second opinion. I also want to thank my classmates from the finance program, Vikrant Tyagi, William Weld, and David Pompilio, who offered key advice and answered lots of questions during the initial years of graduate school, and with whom I later had many helpful discussions. I also want to thank both Numeric Investors, LLC, and GMO, LLC, for providing me with research infrastructure to carry out much of the research in Chapter 3. Lastly, I want to thank a few of my colleagues, George Sakoulis and Kirsten Syverson at Numeric, and Tom Bok at GMO, who kept encouraging me to finish my thesis after I began work there. I also want to gratefully acknowledge the help from staff at CISER, especially Carol Murphree, for being so supportive of all my computing and data needs, and Paula Douglass for proofreading the thesis. I also want to thank Sai Maudgalya, who has been a source of constant encouragement over the last ten years. In the interest of space, I will refrain from mentioning more names but wish all the best to all my colleagues at Cornell. vi TABLE OF CONTENTS BIOGRAPHICAL SKETCH.
Page 1. Information Risk and Capital Structure By: Prasun Agarwal pa62@cornell. edu Johnson Gradu... more Page 1. Information Risk and Capital Structure By: Prasun Agarwal pa62@cornell. edu Johnson Graduate School of Management Cornell University Ithaca, NY 14853-6201 607-255-2614 and Maureen O'Hara mo19@cornell ...
v I realized the importance of fellow students towards enriching graduate life. I thank my classm... more v I realized the importance of fellow students towards enriching graduate life. I thank my classmates from the economics program, Jayant Ganguli, Koralai Kirabaeva, Amit Anshumali, and Serif Aziz, for being both excellent colleagues and great friends, and for always being just a phone call away whenever I needed a second opinion. I also want to thank my classmates from the finance program, Vikrant Tyagi, William Weld, and David Pompilio, who offered key advice and answered lots of questions during the initial years of graduate school, and with whom I later had many helpful discussions. I also want to thank both Numeric Investors, LLC, and GMO, LLC, for providing me with research infrastructure to carry out much of the research in Chapter 3. Lastly, I want to thank a few of my colleagues, George Sakoulis and Kirsten Syverson at Numeric, and Tom Bok at GMO, who kept encouraging me to finish my thesis after I began work there. I also want to gratefully acknowledge the help from staff at CISER, especially Carol Murphree, for being so supportive of all my computing and data needs, and Paula Douglass for proofreading the thesis. I also want to thank Sai Maudgalya, who has been a source of constant encouragement over the last ten years. In the interest of space, I will refrain from mentioning more names but wish all the best to all my colleagues at Cornell. vi TABLE OF CONTENTS BIOGRAPHICAL SKETCH.
for their helpful comments. All remaining errors are our own. We would also like to thank Avanidh... more for their helpful comments. All remaining errors are our own. We would also like to thank Avanidhar Subrahmanyam for making the liquidity data available for NYSE stocks.
The study examines the relationship between institutional ownership and liquidity of stocks, focu... more The study examines the relationship between institutional ownership and liquidity of stocks, focusing on the effect of institutions' information advantage on liquidity. The information advantage of institutions can affect liquidity through two channels: adverse selection and information efficiency. The adverse selection effect results from an increase in information asymmetry. The information efficiency effect, however, results from an increase in competition among institutions. Competition promotes the rate at which private information is incorporated into prices, reducing uncertainty about future payoffs. I find evidence of a nonmonotonic (Ushaped) relationship between the fraction of shares of a firm held by institutions and various measures of stock liquidity. This evidence of a nonmonotonic relationship strongly suggests that the two effects coexist and interact with each other. The effect of information advantage of institutions on liquidity also varies with the amount of publicly available information and asset risk. My evidence indicates that institutional ownership (Granger) causes liquidity, allaying, to an extent, concerns that findings are a result of institutions' preference for liquid stocks. Lastly, I document that institutional investor characteristics, such as investment horizon and risk aversion, also affect liquidity. Liquidity decreases with both increases in fraction of equity held by longterm investors and risk aversion of institutional investor.
* I would like to thank Ola Bengtsson, William Christie, Yaniv Grinstein, Yelena Larkin, Roni Mic... more * I would like to thank Ola Bengtsson, William Christie, Yaniv Grinstein, Yelena Larkin, Roni Michaely, Tim Mount, Heather Tookes, Vikrant Tyagi, Bill Weld, seminar participants at Cornell University, and especially Maureen O'Hara and Gideon Saar for very helpful discussions ...
v I realized the importance of fellow students towards enriching graduate life. I thank my classm... more v I realized the importance of fellow students towards enriching graduate life. I thank my classmates from the economics program, Jayant Ganguli, Koralai Kirabaeva, Amit Anshumali, and Serif Aziz, for being both excellent colleagues and great friends, and for always being just a phone call away whenever I needed a second opinion. I also want to thank my classmates from the finance program, Vikrant Tyagi, William Weld, and David Pompilio, who offered key advice and answered lots of questions during the initial years of graduate school, and with whom I later had many helpful discussions. I also want to thank both Numeric Investors, LLC, and GMO, LLC, for providing me with research infrastructure to carry out much of the research in Chapter 3. Lastly, I want to thank a few of my colleagues, George Sakoulis and Kirsten Syverson at Numeric, and Tom Bok at GMO, who kept encouraging me to finish my thesis after I began work there. I also want to gratefully acknowledge the help from staff at CISER, especially Carol Murphree, for being so supportive of all my computing and data needs, and Paula Douglass for proofreading the thesis. I also want to thank Sai Maudgalya, who has been a source of constant encouragement over the last ten years. In the interest of space, I will refrain from mentioning more names but wish all the best to all my colleagues at Cornell. vi TABLE OF CONTENTS BIOGRAPHICAL SKETCH.
Page 1. Information Risk and Capital Structure By: Prasun Agarwal pa62@cornell. edu Johnson Gradu... more Page 1. Information Risk and Capital Structure By: Prasun Agarwal pa62@cornell. edu Johnson Graduate School of Management Cornell University Ithaca, NY 14853-6201 607-255-2614 and Maureen O'Hara mo19@cornell ...
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