This thesis aims at investigating the relationship between liquidity and information asymmetry. Recent studies try to incorporate liquidity and information risk factors into asset pricing models but whether just one or both should be priced remains uncertain. Since the introduction of the probability of information-based trading (PIN) model (Easley et al., 1996) evidence has been offered to prove that it is a risk factor and it has been adopted as a highly convenient and plausible measure of private information and information risk. In order to carry out our investigation, we use PIN to measure the level of information asymmetry in comparison with seven well-known liquidity measures. Our results indicate shared characteristics with these measures. We find that within our sample period of 1984-2002 PIN may serve as a liquidity indicator but is questionable as a separate risk-based factor. We compute PPIN, a proxy of PIN proposed by Aslan et al. (2011), in order to extend our sample period to 1969-2009 and we investigate PPIN against the seven well-known liquidity measures. We provide evidence of diminishing information asymmetry. We find PPIN inconsistent with asymmetric information as a priced risk factor but a good predictor of future returns.