Does asymmetric information affect a stocks expected return? Using stock-level daily institutional ownership percentage data from the Shanghai Stock Exchange,we first show that institutions have a strong information advantage when they trade.We then show that stocks in which institutions trading profits during the past year were in the top quintile outperform bottom-quintile stocks by 6.6%per year going forward,consistent with increasing information asymmetry raising the cost of capital.Past institutional trading profits predict future returns more strongly in stocks where institutional trading profitability is more persistent.