Publication Details
Abstract
Information asymmetry is usually inferred from enforcement records of insider trading, yet in most frontier markets such records do not exist. This paper develops and applies a framework for measuring information asymmetry when the regulator has never prosecuted a single insider-trading case, using Uzbekistan – a market whose capitalisation grew 14-fold in 2018–2025 while its free float stayed at 1.5% – as a laboratory. We hand-collect a microstructure dataset for 72 listed equities on the Tashkent Stock Exchange (July–September 2026) and estimate Roll and quoted spreads, Amihud illiquidity, zero-volume days and Lee–Ready order imbalance, complemented by a market-adjusted event study of material-fact disclosures and a ten-year (2016–2025) time-series model of market activity. Three results stand out. First, the market is highly asymmetric by any international benchmark: the median Roll effective spread is 3.4% (58% of securities exceed 2%), the median Amihud ratio is 35.9 and one quarter of securities have zero-volume days. Second, we document a “state-insider” channel: controlling for trading value, sector and share class, state-controlled issuers exhibit 2.4 times higher illiquidity (β = 0.883, p < 0.01) and twice the daily volatility of private issuers, while the median lag between a corporate event and its official disclosure is 12 days and abnormal returns of −9.4% to +29.1% accumulate before disclosure. Third, a two-equation model shows that each additional regulatory act raised investor activity by 63% on average, and scenario forecasts indicate that without enforcement reform the median spread will remain above 3% through 2030, whereas the proposed disclosure-and-surveillance package reduces it to 2.0–2.4% and lifts turnover from 6% to 25–31%. The paper contributes a replicable measurement toolkit for markets without enforcement data, provides the first firm-level microstructure estimates for Uzbekistan, and derives surveillance thresholds and a regulatory roadmap that are directly usable by frontier-market regulators.