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An Empirical Analysis Of The Effects Of Online Trading On Investor Reactions To Earnings Announcements
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Book Synopsis An Empirical Analysis of the Effects of Online Trading on Investor Reactions to Earnings Announcements by : Anwer S. Ahmed
Download or read book An Empirical Analysis of the Effects of Online Trading on Investor Reactions to Earnings Announcements written by Anwer S. Ahmed and published by . This book was released on 2002 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study provides evidence regarding the effects of online trading on stock market reactions to quarterly earnings announcements. We test for differences in stock price and volume reactions to quarterly earnings announcements between a period with a significant amount of online trading (1996-1999) and a period without online trading (1992-1995). We conjecture that online trading has increased the proportion of naive investors in the market. Based on noisy rational expectations models of trade, we predict that this will result in larger stock price and trading volume reactions to earnings announcements. We find strong evidence in support of these predictions. The stock price results suggest that the advent of online trading has decreased average prior precision and the trading volume results suggest that online trading has increased differential belief revisions around earnings announcements. An analysis of the relation between volume reactions and price reactions in both periods suggests that the increase in differential belief revisions is primarily due to an increase in the differential interpretation of earnings announcements in the online trading period. Our findings are relevant for assessing the validity of concerns about online trading expressed by regulators and the validity of theoretical models of trade with asymmetrically informed investors.
Book Synopsis An Empirical Analysis of the Effects of Online Trading on Stock Price and Trading Volume Reactions to Earnings Announcements by : Anwer S. Ahmed
Download or read book An Empirical Analysis of the Effects of Online Trading on Stock Price and Trading Volume Reactions to Earnings Announcements written by Anwer S. Ahmed and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study provides evidence on the effects of online trading on stock price and trading volume reactions to quarterly earnings announcements. We test for differences in stock price and volume reactions to quarterly earnings announcements between a period with a significant amount of online trading (1996-1999) and a period without online trading (1992-1995). We conjecture that online trading has increased the proportion of naive investors in the market. We predict that this will result in (i) a decrease in the average precision of investor information prior to earnings announcements implying higher ERCs, (ii) an increase in differential interpretation of earnings leading to higher trading volume reactions that are unrelated to price change, and (iii) a decrease in differential prior precision leading to a decrease in the association between trading volume and absolute price change. We find evidence consistent with all three predictions. Our findings are relevant for assessing the validity of concerns about online trading expressed by regulators and the validity of theoretical models of trade with asymmetrically informed investors.
Book Synopsis Investors' Trade Size and Trading Responses Around Earnings Announcements by : Neil Bhattacharya
Download or read book Investors' Trade Size and Trading Responses Around Earnings Announcements written by Neil Bhattacharya and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research suggests that the earnings expectations of a segment of the market can be described by the seasonal random-walk model. Prior research also provides evidence that less wealthy and less informed investors tend to make smaller trades (small traders) than wealthier and better informed investors (large traders).I hypothesize that it is the earnings expectations of small traders that are associated with predictions from the seasonal random-walk model. By directly analyzing the trading activities of small and large traders, this study provides evidence that is largely consistent with the hypotheses.Specifically, small traders' trading response around earnings announcements is increasing in the magnitude of seasonal random-walk forecast errors even after controlling for absolute analyst forecast errors, contemporaneous price changes, and market-wide trading. Supplementary analysis reveals that this effect is largely confined to firms with relatively impoverished information environments (i.e., smaller firms and firms with little to moderate analyst following).
Book Synopsis The Changing Behavior of Trading Volume Reactions to Earnings Announcements by : Orie E. Barron
Download or read book The Changing Behavior of Trading Volume Reactions to Earnings Announcements written by Orie E. Barron and published by . This book was released on 2016 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: The increase in investor diversity over the last 35-40 years (ICI 2014) prompted us to revisit trading volume reactions to earnings announcements and how these reactions vary with firm size. This increase in investor diversity would likely lead to an increase in differences in the precision of pre-announcement information and potentially increase the importance of earnings announcements to resolve investor disagreement. We find that the nature of trading volume reactions to earnings announcements has fundamentally changed over the 35-year time period 1977-2011. There has been a dramatic increase in the magnitude and frequency of volume reactions to earnings announcements over this time period, and this effect is more pronounced in large firms where volume reactions were previously infrequent. The increase in large firms' trading volume reactions is so pronounced that the relation between volume reactions and firm size has turned positive in recent years, thereby reversing Bamber's (1986, 1987) previously documented negative relation. We provide intuition and empirical evidence that our results are attributable to the resolution of differential prior precision among an increasingly diverse set of investors following large firms.
Book Synopsis When Firms Talk, Do Investors Listen? The Role of Trust in Stock Market Reactions to Corporate Earnings Announcements by : Mikhail Pevzner
Download or read book When Firms Talk, Do Investors Listen? The Role of Trust in Stock Market Reactions to Corporate Earnings Announcements written by Mikhail Pevzner and published by . This book was released on 2015 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether the level of trust in a country affects investors' perception and utilization of information transmitted by firms through financial disclosure. Specifically, we investigate the effect of societal trust on investor reactions to corporate earnings announcements. We test two competing hypotheses: on the one hand, corporate earnings announcements are perceived as more credible by investors in more trusting societies and therefore elicit stronger investor reactions; on the other hand, societal trust mitigates outside investors' concern of moral hazard and reduces the value of corporate earnings announcements to them, thereby weakening their reactions to these events. We analyze the abnormal trading volume and abnormal stock return variance during the earnings announcement period in a large sample of firm-year observations across 25 countries, and find that both measures of investor reactions to earnings announcements are significantly higher in more trusting countries. We also find that the positive effect of societal trust on investor reactions to earnings news is more pronounced (1) when a country's investor protection and disclosure requirements are weaker, suggesting that trust acts as a substitute for formal institutions, (2) when a country's average education level is lower, consistent with less educated people relying more on trust in making economic decisions, and (3) when firm level information asymmetry is higher, supporting the notion that trust plays a more important role in poorer information environments.
Book Synopsis The Disposition Effect and Investors' Reaction to Earnings Announcements by :
Download or read book The Disposition Effect and Investors' Reaction to Earnings Announcements written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the way in which the disposition effect, which is the tendency to realize gains before losses, influences investors' reaction to earnings announcements. The research investigates the impact of this behavioral bias both in the announcement window and in the medium term, using a single sample for both the analyses; the sample covers earnings announcements of US stocks between year 1992 and 2014. I find that those stocks that are in aggregate loss tend to perform better during the announcement window than those that are in aggregate gain, ceteris paribus. In the medium term, this market inefficiency is cancelled out, and those stocks that are in positive capital gain at the moment of the announcement perform better in the following sixty trading days than those trading at a loss; the relative difference in performance generates quarterly alphas of almost 300 basis points. The influence of the disposition effect is also certified by a reversion of this reaction for those earnings announcements that take place during December; due to tax reasons, investors realize losses rather than gains during December, producing then an opposite reaction to earnings announcements. The final proof of the influence of the disposition effect comes from the analysis of volumes: during the announcement window, investors are more prone to trade stocks that are in aggregate gain, generating thus a higher trading volume for these stocks; this effect is reverted during December.
Download or read book Stock Message Boards written by Y. Zhang and published by Springer. This book was released on 2014-12-04 with total page 301 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stock Message Boards provides empirical data to reveal how online communication not only impacts stock returns, but also volatility, trading volume, and liquidity, as well as an investing firm's value and reputation.
Book Synopsis STOCK PRICE REACTIONS TO EARNINGS ANNOUNCEMENTS: A by : VICTOR L. BERNARD
Download or read book STOCK PRICE REACTIONS TO EARNINGS ANNOUNCEMENTS: A written by VICTOR L. BERNARD and published by . This book was released on 1992 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Are Algorithmic Trades Informed? - An Empirical Analysis of Algorithmic Trading Around Earnings Announcements by : Alex Frino
Download or read book Are Algorithmic Trades Informed? - An Empirical Analysis of Algorithmic Trading Around Earnings Announcements written by Alex Frino and published by . This book was released on 2015 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the impact of corporate earnings announcements on trading activity and speed of price adjustment, analyzing algorithmic and non-algorithmic trades during the immediate period pre- and post- corporate earnings announcements. We confirm that algorithms react faster and more correctly to announcements than non-algorithmic traders. During the initial surge in trading activity in the first 90 seconds after the announcement, algorithms time their trades better than non-algorithmic traders, hence algorithms tend to be profitable, while non-algorithmic traders make losing trades over the same time period. During the pre announcement period, non-algorithmic volume imbalance leads algorithmic volume imbalance, however, in the post announcement period, the direction of the lead-lag relationship is exactly reversed. Our results suggest that as algorithms are the fastest traders, their trading accelerates the information incorporation process.
Book Synopsis Impact of Investors' Trading Activity to Post-Earnings Announcement Drift by : Markku J. Vieru
Download or read book Impact of Investors' Trading Activity to Post-Earnings Announcement Drift written by Markku J. Vieru and published by . This book was released on 2005 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study focuses on post-earnings-announcement drift in an emerging market and whether it is associated with the trading activity of non-institutional trading around interim earnings announcements. We separate the stock trading activity of Finnish households into five trading classes. Data is all trades executed on the Helsinki Stock Exchange during 1996-2000. Results show that when earnings news contains only moderate price effects no clear evidence is found to show that trading by any of the specified non-institutional trading activity classes is particularly associated with price changes. However, excess buying of passive and intermediate individual investors after extremely negative earnings news seems to intensify the negative post-earnings returns. Also for extremely positive earnings news trading by individuals seems to be related to the post-earnings returns. In that sense post-earnings returns are related with the trading of non-institutional activity classes. However, the net trading of non-institutional investors with different trading activities on the announcement day does not affect the correlation between earnings surprises and subsequent returns. This suggests that the net trading of non-institutional investors' trading activity on the announcement event does not predict subsequent returns. Thus this result is consistent with that of Hirshleifer, Myers, Myers and Teoh (2003).
Book Synopsis Effect of Investor Sentiment on the Stock Market Reaction to Earnings News by : David Folsom
Download or read book Effect of Investor Sentiment on the Stock Market Reaction to Earnings News written by David Folsom and published by . This book was released on 2015 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we examine the effect of investor sentiment on the stock market reaction to earnings news (i.e., the earnings response coefficient or ERC) for loss firms. We find that the ERC for loss firms' earnings increases is less positive as sentiment increases, contrary to the findings in prior literature examining how sentiment affects the ERC for profit firms. Cross-sectional analysis reveals that the dampened ERC associated with earnings increases in loss firms during high sentiment periods is driven by various firm characteristics including low book values of equity, low R&D intensity, the inability to raise external capital, and a lack of nonrecurring write-offs. We also examine future returns and find that, on average, the effect of sentiment on loss firms' earnings changes reverses in the second year following an earnings announcement.
Book Synopsis The Handbook of Equity Market Anomalies by : Leonard Zacks
Download or read book The Handbook of Equity Market Anomalies written by Leonard Zacks and published by John Wiley & Sons. This book was released on 2011-08-24 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investment pioneer Len Zacks presents the latest academic research on how to beat the market using equity anomalies The Handbook of Equity Market Anomalies organizes and summarizes research carried out by hundreds of finance and accounting professors over the last twenty years to identify and measure equity market inefficiencies and provides self-directed individual investors with a framework for incorporating the results of this research into their own investment processes. Edited by Len Zacks, CEO of Zacks Investment Research, and written by leading professors who have performed groundbreaking research on specific anomalies, this book succinctly summarizes the most important anomalies that savvy investors have used for decades to beat the market. Some of the anomalies addressed include the accrual anomaly, net stock anomalies, fundamental anomalies, estimate revisions, changes in and levels of broker recommendations, earnings-per-share surprises, insider trading, price momentum and technical analysis, value and size anomalies, and several seasonal anomalies. This reliable resource also provides insights on how to best use the various anomalies in both market neutral and in long investor portfolios. A treasure trove of investment research and wisdom, the book will save you literally thousands of hours by distilling the essence of twenty years of academic research into eleven clear chapters and providing the framework and conviction to develop market-beating strategies. Strips the academic jargon from the research and highlights the actual returns generated by the anomalies, and documented in the academic literature Provides a theoretical framework within which to understand the concepts of risk adjusted returns and market inefficiencies Anomalies are selected by Len Zacks, a pioneer in the field of investing As the founder of Zacks Investment Research, Len Zacks pioneered the concept of the earnings-per-share surprise in 1982 and developed the Zacks Rank, one of the first anomaly-based stock selection tools. Today, his firm manages U.S. equities for individual and institutional investors and provides investment software and investment data to all types of investors. Now, with his new book, he shows you what it takes to build a quant process to outperform an index based on academically documented market inefficiencies and anomalies.
Book Synopsis The Effect of Earnings Announcements on Trading Outcomes for Different Investor Classes by : James Dale Vincent
Download or read book The Effect of Earnings Announcements on Trading Outcomes for Different Investor Classes written by James Dale Vincent and published by . This book was released on 2010 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :Francisco J. Martínez-López Publisher :Springer Science & Business Media ISBN 13 :3642397476 Total Pages :1004 pages Book Rating :4.6/5 (423 download)
Book Synopsis Handbook of Strategic e-Business Management by : Francisco J. Martínez-López
Download or read book Handbook of Strategic e-Business Management written by Francisco J. Martínez-López and published by Springer Science & Business Media. This book was released on 2013-11-19 with total page 1004 pages. Available in PDF, EPUB and Kindle. Book excerpt: This research handbook provides a comprehensive, integrative, and authoritative resource on the main strategic management issues for companies within the e-business context. It covers an extensive set of topics, dealing with the major issues which articulate the e-business framework from a business perspective. The handbook is divided into the following e-business related parts: background; evolved strategic framework for the management of companies; key business processes, areas and activities; and, finally, emerging issues, trends and opportunities, with special attention to diverse Social Web-related implications. The articles are varied, timely and present high-quality research; many of these unique contributions will be especially valued and influential for business scholars and professionals interested in e-business. Many of the contributors are outstanding business scholars who are or have been editors-in-chief of top-ranked management and business journals or have made significant contributions to the development of their respective fields.
Book Synopsis Post-Earnings Announcement Drift by : Tomas Tomcany
Download or read book Post-Earnings Announcement Drift written by Tomas Tomcany and published by LAP Lambert Academic Publishing. This book was released on 2010-11 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is a well documented finding in finance theory that share prices drift in the direction of firms' unexpected earnings changes, a phenomenom known as post-earnings announcement drift, or earnings momentum. In this book, I study the stock prices' reaction to firms' quarterly earnings announcements. The book shows that the timeframe in which the drift occurs is related to the size of a firm and is limited in time after the earnings announcement. I further analyze the effect of the number of analysts covering a firm on the magnitude and persistance of post-earnings announcement drift. I document that recent analyst coverage predicts large drifts after the earnings announcements. I suggest several possible explanations, but the evidence seems most consistent with recent analyst coverage providing information about investor (or analyst) expectations regarding firm's future earnings. This book should be useful to professionals in Financial Economics, especially to those interested in Behavioral Finance in stock markets, but also to equity analysts, traders or investors interested in the stocks' response to earnings news.
Book Synopsis Individual Investor Trading Around Earnings Announcements by : Zhijuan Chen
Download or read book Individual Investor Trading Around Earnings Announcements written by Zhijuan Chen and published by . This book was released on 2013 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies whether individual investors have information advantage before earnings announcements on an emerging market using a unique data set of TWSE. Consistent with existing research on American market, it is surprising that pre-event individual investor trading is also positively correlated with stock returns on and after earnings announcements dates in Taiwan. However, the sign of correlation between individual investor trading and stock return around earnings announcements shows weak evidence of noise trading rather than information advantage, which is opposite to that of American stock market.
Book Synopsis The Effect of Earnings Announcement Distraction on Individual Trading Behaviour by : Ameer Gakhar Sultan
Download or read book The Effect of Earnings Announcement Distraction on Individual Trading Behaviour written by Ameer Gakhar Sultan and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research has shown that trading decisions by individual investors are influenced by behavioural factors such as attention effects. The literature examining the effects of attention on individual trading behaviour measures attention using proxies such as abnormal trading volume and stocks covered in the media. These proxies do not separate the effect of trading due to changing fundamentals from attention-based trading. I use the distraction caused by earning announcements to study the effect of attention on individual trading behaviour. Consistent with the literature, I find that investors net buy stocks with extreme positive and extreme negative earnings. However, this result is only significant when investors are most attentive (least distracted); that is, on days when the number of competing announcements is low. On high distraction days when investors make the wrong trading decision initially, they amend their prior trading decision after a lag (delayed reaction) when they eventually observe the true earnings of the stock. The most active investors amend this prior trading decision before relatively nonactive investors do. The delayed reaction by active investors is not portrayed for stocks with no analyst coverage, as evident in consistent net buying. The results remain robust even if surprise is measured using analyst forecasts; announcement distractions are limited to announcements in similar or very different industries.
