Individual and Institutional Informed Trading in Competing Firms Around Earnings Announcements PDF Download
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Author: Priyantha Mudalige
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
This study investigates individual and institutional trading activities in competing firms to infer informed trading. We find evidence for individual and institutional informed trading in competing firms around earnings announcements. The evidence is stronger prior to announcements than after announcements. Magnitude of institutional (individual) net order flow coefficient decreases (increases) with lag length, suggesting that institutional trading captures information faster than individual trading. Individual net order flow transmit information cross-stock when competitor is a small firm while institutional net order flow conveys information cross-stock irrespective of firm size. Our results will be informative for regulators with regard to insider trading laws and provide insights for market participants on the impact of individual and institutional trading on cross-stock price discovery process.
Author: Priyantha Mudalige
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
This study investigates individual and institutional trading activities in competing firms to infer informed trading. We find evidence for individual and institutional informed trading in competing firms around earnings announcements. The evidence is stronger prior to announcements than after announcements. Magnitude of institutional (individual) net order flow coefficient decreases (increases) with lag length, suggesting that institutional trading captures information faster than individual trading. Individual net order flow transmit information cross-stock when competitor is a small firm while institutional net order flow conveys information cross-stock irrespective of firm size. Our results will be informative for regulators with regard to insider trading laws and provide insights for market participants on the impact of individual and institutional trading on cross-stock price discovery process.
Author: Yu-Chen Wei
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This study constructs the institutional- and individual-based probability of informed trading (PIN) by adjusting Easley, Hvidkjaer and O'Hara (2002) and investigates the impact of the informed trading behaviors of institutions and individuals on the post-announcement drift around the earnings announcement. The differences between this study and the previous literatures lie in that the investor types of informed traders are distinguished as institutions and individuals. Besides, the trading date effect is considered to examine the informed trading behaviors. The findings show that the informed trading behaviors of institutions and individuals can be distinguished. If there are informed traders involves in the stocks, the cumulative abnormal returns after the earnings announcement may be higher than the other stocks with no informed traders. Some individuals may possess relevant information that may prompt them to trade prior to or after the earnings announcement. The findings of the study may contribute to the government regulations and portfolio selections.
Author: Kyojik Song
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
This paper investigates whether institutional investors trade profitably around earnings announcements. We argue that institutions have informational advantage before negative earnings surprises but not before positive earnings surprises since the positive news tend to leak to market before the event. Using unique Korean data over the period of 2001-2010, we find that trading volume decreases only before the negative event due to information asymmetry among investors. We also find that institutions sell the stock before the negative earnings surprises but individual investors do not anticipate the bad news, and that trade imbalance by the institutions is positively related to the announcement abnormal returns of the negative events. The evidence is consistent with our conjecture that the domestic institutions exploit their superior information around the negative earnings surprises. Our results also show that foreign investors do not have any informational advantage compared to local investors on the upcoming earnings news.
Author: Tae Jun Park
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper investigates whether institutional investors trade profitably around the announcements of positive or negative earnings surprises. Using Korean data over the period of 2001-2010, we find that information asymmetry is larger before negative earnings surprises (earnings shock) among investors and that the trading volume decreases only before earnings shock announcements due to the severe information asymmetry. We also find that institutions sell their stocks prior to earnings shock announcements whereas individual and foreign investors do not anticipate bad news. Finally, we find that institutional trade imbalance is positively related to the post-announcement abnormal returns of negative events. This study complements and extends prior literature on informed trading around earnings announcements by documenting evidence that domestic institutions exploit their superior information around particularly earnings shock announcements.
Author: Malay K. Dey
Publisher:
ISBN:
Category :
Languages : en
Pages : 23
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Book Description
Using TORQ database we investigate the intra-day trading volume reactions to earnings announcements of five trader groups, individuals, institutions, exchange members, program traders, and specialists. The results of this study indicate that institutions are most active in the immediate aftermath of an announcement. Individual investors are slow at the beginning but accumulate heavy volume afterwards and exceed institutional trading volume. We find support for Harris and Raviv (1993) and Admati and Pfleiderer (1988), who respectively argue that divergence of opinion about a public information and portfolio rebalancing cause surges in pre and post-announcement trading volume. Further we find evidence of swift and aggressive trading by informed and sophisticated institutions in the immediate aftermath of the announcement, and delayed, aggressive trading volume quot;overreactionquot; by quot;slowquot; and quot;overconfidentquot; individual investors as documented by Barber and Odean (2000, 2002) and Daniel et al (1998). NYSE specialists provide bulk of the liquidity needs around earnings announcements.
Author: John Shon
Publisher: FT Press
ISBN: 0132615851
Category : Business & Economics
Languages : en
Pages : 225
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Book Description
Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples! Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies’ quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks–and, in some cases, conduct large sample tests–to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.
Author: Ron Kaniel
Publisher:
ISBN:
Category : Corporate profits
Languages : en
Pages : 53
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Book Description
Author: John Affleck-Graves
Publisher:
ISBN:
Category :
Languages : en
Pages : 22
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Book Description
This study examines transactions in stocks during the thirty trading days prior to earnings announcements. Using two methodologies, we find evidence of informed trading for initiators of large transactions (presumably institutions) but not for initiators of small transactions (presumably individuals). Specifically, we find that, relative to a control period, initiators of large transactions tend to buy (sell) stocks prior to earnings announcements that exceed (fall short of) analyst forecasts. In addition, the fraction of total stock price movement that occurs on large transactions is substantially higher during the pre-announcement period than during the control period. Results of both tests suggest, contrary to previous research, that some large traders have and use superior private information prior to large earnings surprises.
Author: Brian Roseman
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
Using a sample of NASDAQ firms we investigate informed trading in the limit order book (LOB) prior to earnings announcements. Consistent with recent limit order theory, and in contrast to classic adverse selection models, we show that informed traders supply liquidity. Relative to a sample of low-shock announcements as a control, we find that for high-shock firms, the spread is lower, the correlation of bid and ask depth is higher, the implied cost of trading is lower, and the information share of component of the limit order book is higher, relative to low-shock earnings announcements.
Author: Markku J. Vieru
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
The primary goal of this paper is to study whether the permanent price impact of large trades are greater before or after an interim earnings announcement on the Helsinki Stock Exchange. If the permanent price effects of large trades are greater before the announcement this would suggest that investors believe that some traders are better informed before the interim earnings announcement than after. Theoretical support is available that information asymmetry is greater prior to earnings announcements than after. The anticipation of a forthcoming public announcement stimulates the acquisition of private information, causing an increase in information asymmetry. This increase is facilitated by the flow of earnings-related information to the market (e.g., via pre-announcement communications by firms, actual earnings announcements of competitors, etc.). Thus investors gather information, make assessments, and form trading positions accordingly. In addition, compared to individuals (small investors), institutions (large investors) are better informed because they tend to have lower marginal costs of information gathering. Thus large trades are expected be monitored more closely on the trading screen and the information content for pricing purposes is expected to be larger for these trades than for corresponding small trades. Using permanent price effects as a measure of price adjustment for private information, tests were performed to see whether price adjustments are greater in pre-announcement periods than in post-announcement periods. The results, based on interim earnings releases, suggest that large trades do indeed produce greater permanent price effects before an announcement than after it. This suggests that large trades associated with price changes (especially uptick trades) before an announcement send a stronger signal to other investors than similar trades after the announcement. For small trades the results were insignificant.
