Governance characteristics are potentially a proxy for information asymmetry that may be better captured by the market liquidity of a company's shares. Although liquidity has been established as a risk factor in the asset-pricing paradigm, there is still an ongoing debate as to whether...

This paper examines the impact of volatility on information asymmetry in explaining excess returns. We find that illiquidity is significant at different levels of volatility but that adverse selection costs are not significant during periods of extreme volatilities, i.e., very high and very low...

In this paper, we argue that better corporate governance may reduce information asymmetries among investors. We find that corporate governance affects asset pricing and returns through the channel of adverse selection. Adverse selection has significant additional explanatory power in five-factor...