Firm size, news in the financial newspapers about the firm in a year, fat tails (kurtosis), earning management, microstructure proxies (bid-ask spreads....), etc.

So, you have a lot of options. It depends what you want to measure and variables really available. Best stefano

Thanks, Stefano. However all these proxies (as others) still are not precise. For example, firm size is an abstraction, since all the firms from a size on have to be transparent. In Brazilian market, for example, new companies have to follow some corporate governance rules, such as information to the markets. And this eliminates news in the financial papers too. Earning management are not usually disclosed, even in more mature markets... About kurtosis and microstructure proxies, in both cases what is being measured has more to do with the stock price behavior than with specifically the asymmetry, since many idiossincratic and market factors could affect both liquidity and price behavior. So, I am still in the quest of proxies that could better represent the concept... Thanks, again.

In related literature, it has been measure using the variance of the idyosicratic risk standardized by firms total variance. A higher proportion of firm-specific risk indicates investors have more information about the firm and depend less on the behaviour of the overall market, is more "trasparent".

Omar, thank you for your answer. The problem is to determine the causality (idiosincratic risk determines asymmetry, or is it the inverse?). Thanks.

If you talking about traded firms in economies with financial analysts, the best proxies are number of analysts covering the firm; forecast error in analyst forecasts; and dispersion or standard deviation in analyst forecasts. If these are not available, a rough measure will be proportion of intangible assets in firm value. You can also use measures from the market microstructure literature, like the bid-ask spread, and PIN (see a paper by Maureen O' Hara and co-authors for details at her Cornell University website).

Information asymmetry is a difficult concept to measure in Corporate Finance research. Most measures of information asymmetry in the literature are mere proxies. For public listed firms, it is true that number of analyst covering the firm and the standard deviation in analyst forecast appear to be good proxies.

Another standard proxy for information asymmetry is the bid-ask spread for the stock prices. If the investor is willing (bidding) to pay an amount that is less than what the owner is asking to sell it for, it must be because the owner/seller and the potential buyer/shareholder have different information endowments. This leads to information asymmetry.

Sati, hi. In fact, in general my researchs are based in countries and market in which transaction is not fluid or costless,but the opposite. But, I still would consider it is more a problem of liquidity than it is from asymmetry, due to the specificity of the markets. The lack of persons trading an asset would not lead to asymmetry, although it may be a sign that this asset is less traded because of it, I would agree. But only if the difference between ask-bid would be representative or if the trade are really not frequent enough. Still, a lot to do to improve this point in financial literature...

Lack of liquidity could be an indication of information asymmetry. That is so because a potential buyer/investor would be reluctant to enter into a transaction if he/she believes that the shareholder/seller has better information about the stock. In other words, an illiquid market could indicate at least a perception of differential information endowment across participants in the marketplace.

Hi!

I agree with Sati. Concerning asymmetry the bid ask-spread could be considered. I will add that the variance of earning forecasts among analysts (I/B/E/S) may be used. The drop of the share price at the moment of an IPO is another possibility (see Rock, 1986) JFE.

Hi!

I could add that R&D  is an increasingly  important yet poorly disclosed productive input and it may be a large source of insider gains. In fact, insiders take advantage of information on planned changes in R&D budgets.

Accounting conservatism may also causes a cash flow asymmetry from an other point of view.

HI,

Here is a paper concerned with the inertia of analyst recommendations:

The Reluctant Analyst

Journal of Accounting research september 2016 , vol 54 , Issue 4, (pages 987–1040)

DAN BERNHARDT, CHI WAN and ZHIJIE XIAO

Best regards

Hi!

I try to enrich the answers using another concept: informativeness. Remember the paper given by Roll in the Journal of Finance (1988) "R2" concerning the beta coefficients. Perhaps that 1-R2 the idiosyncratic risk matters with asymmetry!

Hello team: I wish to measure information asymmetry in credit/Lending market and looking of best variables. Specifically, I wish to find measurements for this variables ; borrowers-lenders information asymmetry, shareholders -managers information asymmetry, creditors -regulators information asymmetry and regulator-bank information asymmetry.

Bid-Ask spread, share return volatility and share trading volume can be used as a potential proxy for information asymmetry.

Rent.

If in a competitive market, no information barriers, there would be a perfect equilibrium between the supply and demand. But if there is information asymmetry, the information holders have inferior to the other side. In this case, there would be rent. Rent is the one of the potential indicators for how much the information asymmetry exists.

The rent could be evaluated by the method of opportunity costs. The methodology could be learnt from taxation, welfare loss, and other distorted market. In other words, the distortion of the market because of the information is the potential appropriate evaluation for asymmetry information.