| The informational efficiency of asset price varies across individual stock according to stock attributes. We find the informational efficiency is higher for stocks with better liquidity provision, frequent trading, higher prices, larger market capitalizations, and smaller trade sizes than in other ones. These findings suggest that liquidity stimulates arbitrage activity, which, in turn, enhances informational efficiency. Informational efficiency also varies with information environment. We find that stocks with greater information-based trading exhibit higher level of efficiency. The empirical results indicate less concentrated institutional holdings and sound corporate governance structure enhance market efficiency. Lastly, market structure influences informational efficiency. NYSE stocks achieve higher level of efficiency than NASDAQ stocks do. Informational efficiency improves after decimalization in both markets. Our results are robust and not driven by differences in stock attributes between the two markets or time periods. Overall, our results indicate that liquidity provision, stock attributes, market structure, and informational environment exert a significant impact on the realization of informational efficiency. |
