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Author: Guojun Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
Using the special event of short selling ban removal in the Chinese stock market in March 2010, I study the relationship between short selling activities and future stock returns and the effect of short sale constraints on stock price reactions to earnings announcements. I find strong evidence supporting the Diamond and Verrecchia (1987) hypothesis that an unexpected increase in short interest predicts negative future stock returns. The long-short portfolio that buys stocks with a decline or no change in short interest and shorts stocks with an increase in short interest is able to generate a significant positive return in the following week. The positive return is strongest during the first two days, is most significant in three industries: properties, conglomerates, and industrials, is highest for big firms, growth stocks, and stocks with high short interest. Moreover, I also confirm the Diamond and Verrecchia (1987) prediction that reducing short sale constraints leads to smaller price adjustments on the private information announcement day as the stock price reaction to earnings surprises on earnings announcement day is found to be 70% lower after the short sale ban is removed. However, I don't find evidence supporting their prediction that the reduction in price reaction is larger when negative news is released due to data limitations.
Author: Guojun Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
Using the special event of short selling ban removal in the Chinese stock market in March 2010, I study the relationship between short selling activities and future stock returns and the effect of short sale constraints on stock price reactions to earnings announcements. I find strong evidence supporting the Diamond and Verrecchia (1987) hypothesis that an unexpected increase in short interest predicts negative future stock returns. The long-short portfolio that buys stocks with a decline or no change in short interest and shorts stocks with an increase in short interest is able to generate a significant positive return in the following week. The positive return is strongest during the first two days, is most significant in three industries: properties, conglomerates, and industrials, is highest for big firms, growth stocks, and stocks with high short interest. Moreover, I also confirm the Diamond and Verrecchia (1987) prediction that reducing short sale constraints leads to smaller price adjustments on the private information announcement day as the stock price reaction to earnings surprises on earnings announcement day is found to be 70% lower after the short sale ban is removed. However, I don't find evidence supporting their prediction that the reduction in price reaction is larger when negative news is released due to data limitations.
Author: Lin Zheng
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
In this dissertation I aim at improving the understanding of the informativeness of short-selling in the context of the motivation, the impact on future stock returns, and the relation with market efficiencies. In Chapter 1, I study short sellers' reactions after quarterly earnings announcements as well as the associations between short sales and post announcement stock returns. Short sales increase immediately after both negative and positive earnings surprises. After positive earnings surprises, short sellers appear to act as contrarians, and trade against stock price overreaction, thereby inducing price reversal in the long run. After negative earnings surprises, short sellers act as momentum traders, and trade with post earnings announcement drift. However, they are not able to fully arbitrage away the downside post earnings announcement drift. The short sellers' different reactions at subsequent surprises in a series of same-sign earnings surprises implies that short sellers exploit the consequences of other investors' behavioral biases. The results highlight the motivations and impacts for short sales after earnings announcements. In Chapter 2, I investigate the informativeness of short-selling by combining Probability of Information-based Trading measure and short sales transaction data. Short sales depress stock returns in the short run, regardless of the information asymmetry level. However, short sales can not predict future stock return in the long run if information asymmetry levels are low. Large size short sales are the most informed. When short sales constraints are more binding, short-selling is more informed, especially for the stocks with high information asymmetry levels. In Chapter 3, I examine short sales prior to merger and acquisition announcements for acquiring firms. Short-selling increases prior to stock-financed not cash-financed mergers and acquisitions. Pre-announcement abnormal short-selling is negatively related to post-announcement stock returns. Short sellers are informed of the method of payment, but not the outcome. The results also indicate that short-sellers are more active in stocks with larger firm size, lower book-to-market ratio, and higher liquidity.
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: VICTOR L. BERNARD
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
Author: Benjamin Schmitt
Publisher: GRIN Verlag
ISBN: 3656972419
Category : Business & Economics
Languages : en
Pages : 57
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Book Description
Bachelor Thesis from the year 2008 in the subject Business economics - Investment and Finance, grade: 1.1, EBS European Business School gGmbH (Finance), language: English, abstract: Many authors have already studied about stock price reactions after earnings announcements yet, which is because of the importance of earnings announcements, in particular quarterly earnings announcements, for many investors. However, all major studies concerning this topic deal with long-term scenarios, the stock’s price performance is measured for a time period of at least three quarters. Due to the fact that there are many investors, especially institutional investors such as hedge funds that trade stocks much more frequently, the existing studies are not relevant for them. This paper studies stock price reactions around quarterly earnings announcements for companies listed in Deutscher Aktienindex (DAX) or Midcap DAX (MDAX) with respect to changes of the company’s full-year outlook and of earnings surprise regarding analyst consensus forecast within ten days before and after the announcement date. Hence, this paper aims to analyse short-term reaction to quarterly earnings announcements, which are of relevance for all investors, whose investment strategy is, at least partially, focussing on the short-term performance. The main target group of this analysis are therefore hedge funds and investors that run short-term strategies. Due to the fact that the widespread Event Study Methodology is focused on the long-term, it is irrelevant for this analysis.
Author: Dennis Lasser
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the effect of the inherent demand implied by short interest by observing price reactions to earnings announcements based on the level of short interest. We find that for extreme good- and bad- news events, the inherent demand increases stock prices around the earnings announcement date, with the effect being stronger for good news relative to bad news. Specifically, the initial market reaction to an extreme positive earnings surprise is larger for firms with high levels of short interest. On the other hand, for an extreme negative earnings surprise event, the initial market reaction is smaller for heavily shorted firms. Furthermore, the initial rightward demand curve shift caused by the short sellers' reaction to an extreme good (bad) news event also results in a smaller (larger) post-earnings-announcement drift.
Author: Stephen E. Christophe
Publisher:
ISBN:
Category :
Languages : en
Pages : 61
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Book Description
This paper studies short-selling prior to the release of analyst downgrades in a sample of 670 downgrades of NASDAQ stocks between 2000 and 2001. We document abnormal levels of short-selling in the three days before downgrades are publicly announced. Further, we show that this pre-announcement abnormal short-selling is significantly related to the subsequent share price reaction to the downgrade, and especially so for downgrades that prompt the most substantial price declines. Our findings are robust to various controls that might also affect short-selling such as pre-announcement momentum, three-day pre-announcement returns, and the announcement-day share price. In addition, the results are independent of scheduled earnings announcements, analyst herding, and non-routine events near downgrades. Further evidence suggests that tipping is more consistent with the data than the prediction explanation which posits that short sellers successfully predict downgrades on the basis of public information about firms' financial health. Finally, we present evidence that downgraded stocks with high abnormal short-selling perform poorly over the subsequent six months by comparison with those with low abnormal short-selling. Overall, our results support the hypothesis that short sellers are informed traders and exploit profitable opportunities provided by downgrade announcements.
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: Archana Jain
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
We examine short sellers' after-hours trading (AHT) following quarterly earnings announcements released outside of the normal trading hours. Our innovation is to use the actual short trades immediately after the announcements. We find that on these earnings announcement days, there is significant shorting activity in AHT relative to shorting activity both during AHT on non-announcements days as well as during regular trading sessions around announcements. Short sellers who trade after-hours on announcement days earn an excess return of 0.82 percent and 1.40 percent during before-market-open (BMO) and after-market-close sessions (AMC), respectively. The magnitude of these returns increases to 1.48 (3.92) percent for BMO (AMC) earnings announcements with negative surprise. We find that the reactive short selling during AHT has information in predicting future returns. Short-sellers' trades have no predictive power if they wait for the market to open to trade during regular hours. In addition, we find that the weighted price contribution during AHT increases with an increase in after-hours short selling. Overall, our results suggest that short sellers in AHT are informed. Our findings remain robust using alternative holding periods and after controlling for macroeconomic news announcements during BMO sessions.
Author: Joseph Berr Paperman
Publisher:
ISBN:
Category : Corporate profits
Languages : en
Pages : 370
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Book Description
