Investigating the Mediating Roles of Information Asymmetry and Illiquidity Related to Cluster Trading in the ‎Relationship between Noise Trading and Market Efficiency in Tehran Stock Exchange (TSE)‎

This study aimed to investigate the effects of information asymmetry and illiquidity related to cluster trading on market efficiency and examine the mediating roles of these two variables in the relationship between noise trading and market efficiency. To measure the information asymmetry, Adj PIN and illiquidity related to cluster trading obtained from PSOS models were used. Also, market return based on trade volume imbalances was utilized as the indicator of market efficiency. The sample include 146 companies, which were listed in Tehran Stock Exchange between 2014 and 2020. The results showed significant inverse effects of information asymmetry and illiquidity related to cluster trading and market return. However, the effect of illiquidity related to cluster trading on market return was stronger than that of information asymmetry. In addition, the findings showed that noise trading had direct and significant effects on information asymmetry and illiquidity related to cluster trading. Thus, the relationship between noisy trading and market return through information asymmetry and illiquidity relevant to cluster trading, as well as the mediating roles of these two variables, was confirmed.