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Cross-Sectional Identification of Private Information

Dion Bongaerts et al.

Review of Asset Pricing Studies2025https://doi.org/10.1093/rapstu/raaf009article
AJG 3ABDC A*
Weight
0.37

Abstract

We propose a new private information measure based on a model of strategic trade optimization in the cross section of securities. Investors receive liquidity and private information shocks and optimize trading across securities, accounting for price impact (Kyle’s λ). The model yields a simple private information measure: λ×OIB (order imbalance). Intuitively, order imbalance is more likely to be information-driven when trading is expensive. We validate our measure by showing that it is greater for smaller firms with higher analyst dispersion, peaks with insider trades, helps explain return reversals, predicts return volatility, and increases before M&A announcements and after analyst coverage terminations. (JEL G11, G12, G14)

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https://doi.org/https://doi.org/10.1093/rapstu/raaf009

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@article{dion2025,
  title        = {{Cross-Sectional Identification of Private Information}},
  author       = {Dion Bongaerts et al.},
  journal      = {Review of Asset Pricing Studies},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1093/rapstu/raaf009},
}

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Cross-Sectional Identification of Private Information

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.