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Earnings News And Institutional Trading
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Book Synopsis Earnings News and Institutional Trading by : Timothy R. Burch
Download or read book Earnings News and Institutional Trading written by Timothy R. Burch and published by . This book was released on 2002 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how institutions trade in response to earnings news. The key result is that institutions do not seem to engage in momentum trading in response to past earnings news, especially bad news. In multivariate tests, there is significant evidence of momentum trading in response to past returns but not with respect to past earnings news. Momentum trading is strengthened, however, when past returns are accompanied by earnings news of the same sign. There is no evidence that momentum trading in response to past returns is the result of trading in anticipation of earnings news. There is some evidence that institutions engage in contrarian behavior in response to sequences of good or bad news which is consistent with the representativeness hypothesis of Barberis, Shleifer, and Vishny (1998).
Book Synopsis Herding on Earnings News by : Linda H. Chen
Download or read book Herding on Earnings News written by Linda H. Chen and published by . This book was released on 2018 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the role of institutional investors underlying post-earnings-announcement drift (PEAD). Our results show that while institutional investors generally herd on earnings news, such correlated trading among institutions does not eliminate or reduce market underreaction to earnings surprises. Instead, PEAD is significant only in the subsample of stocks where institutions herd in the same direction as earnings surprises. In fact, institutional herding is also positively related to next-quarter earnings announcement returns. We provide evidence that institutional herding on or against earnings news is largely driven by firm characteristics, particularly past firm performance and stock returns. In addition, we find that relative to non-transient institutions, transient institutions have a stronger tendency to herd on earnings information. Finally, based on long-run stock returns, we show that when institutions herd on earnings surprises, institutional trading represents a gradual process of incorporating information into stock prices. On the other hand, when institutions herd against earnings surprises, institutional trading slows down stock price discovery.
Book Synopsis Caught on Tape by : John Y. Campbell
Download or read book Caught on Tape written by John Y. Campbell and published by . This book was released on 2007 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Trading on Corporate Earnings News by : John Shon
Download or read book Trading on Corporate Earnings News written by John Shon and published by FT Press. This book was released on 2011-03-09 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Institutional Trading Around Earnings Announcements by : Adrian Looi
Download or read book Institutional Trading Around Earnings Announcements written by Adrian Looi and published by . This book was released on 2008 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study utilizes a unique database comprising the daily transactions of institutional Australian equity managers to examine whether active investment managers realize abnormal returns from earnings announcements, the nature of the trading strategies employed to generate these abnormal returns, and the magnitude of abnormal returns. We examine three strategies. First, whether fund managers realize abnormal returns from earnings announcements portfolio positions that most likely reflect fundamental analysis. Second, whether fund managers realize abnormal returns from trades immediately prior to the announcement, which most likely reflect short term-profiteering due to information leakage. Third, we examine whether fund managers realize abnormal returns from trades during the announcement period that most likely reflect superior interpretation of the actual earnings announcement. We find that fund managers realize abnormal returns from all three strategies. In addition, we also examine whether fund managers are rational in constructing their trading strategies, and find no evidence of the disposition effect. When investment managers have executed incorrect bets prior to earnings announcements, they subsequently reverse their trades once the public information is released.
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 Why Are Earnings Announcements So Important to Traders and Investors? by : John Shon
Download or read book Why Are Earnings Announcements So Important to Traders and Investors? written by John Shon and published by Pearson Education. This book was released on 2011-03-16 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Element is an excerpt from Trading on Corporate Earnings News: Profiting from Targeted, Short-Term Options Positions (9780137084920) by John Shon, Ph.D., and Ping Zhou, Ph.D. Available in print and digital formats. Understand those crucial quarterly earning announcements: how they work, and how they impact stock prices. Quarterly earnings announcement are the most salient, most anticipated, regularly-recurring announcement that companies make. They are the most watched piece of information that comes directly from the people that know the business the best. They are also considered the most reliable source of information, largely because companies are subject to strict SEC Rule 10b-5 rules...
Book Synopsis Options Trading for the Institutional Investor by : Michael C. Thomsett
Download or read book Options Trading for the Institutional Investor written by Michael C. Thomsett and published by Pearson Education. This book was released on 2014 with total page 337 pages. Available in PDF, EPUB and Kindle. Book excerpt: To protect portfolios in today's volatile and uncertain market environment, institutional investors need to hedge losses, create extra sources of income, and reduce risk. In his extensively updated and expanded Options Trading for the Institutional Investor, Third Edition, renowned options expert Michael C. Thomsett shows how to do all this effectively. One step at a time, Thomsett helps institutional investors exploit powerful, carefully chosen options strategies that can dramatically increase overall returns as you manage risks within your institution's limits. Thomsett discusses covered call writing on carefully selected stocks, contingent purchase strategies, and powerful "combination" strategies that produce cash to bolster current income. He guides professional investors through every strategy, using actual examples, portfolios, and graphs taken directly from today's markets. Wherever applicable, he addresses specific forms of risk and volatility that only institutional investors face. This thoroughly updated Third Edition includes a chart-based analytical method that relies on reversal signals in the underlying as an alternative to volatility analysis. Thomsett presents new chapters on two powerful strategies he has developed and utilized to optimize returns while minimizing risk: the 1-2-3 Iron Butterfly, and the Dividend Collar. This edition also adds detailed new coverage of risk evaluation.
Book Synopsis Individual and Institutional Informed Trading in Competing Firms Around Earnings Announcements by : Priyantha Mudalige
Download or read book Individual and Institutional Informed Trading in Competing Firms Around Earnings Announcements written by Priyantha Mudalige and published by . This book was released on 2016 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Dissecting the Relation Between Insider and Institutional Trading by : He Wang
Download or read book Dissecting the Relation Between Insider and Institutional Trading written by He Wang and published by . This book was released on 2017 with total page 113 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of two essays. In the first essay, we examined the relation between insider trades and institution demand. The literature documents a strong inverse relation between insider trading and institutional demand, suggesting that institutions provide liquidity for insider trading. Motivated by empirical evidence that there is considerable variation of informativeness among institutions and insiders, this paper further examines the relation between insider trading and institutional trading by classifying insiders as opportunistic vs. routine traders and institutions as short-term vs. long-term investors. We find that the inverse relation between insider trading and institutional demand is mainly driven by long-term institutions. In fact, short-term institutions tend to trade in the same direction as opportunistic insiders whose trades are more informative of future stock price changes. The results are stronger for trades on small cap stocks. Further separating officers and directors vs. other insiders, we show that our findings are driven primarily by trades from opportunistic officers and directors.
Book Synopsis How Investors Trade Around Interim Earnings Announcements by : Hannu J. Schadewitz
Download or read book How Investors Trade Around Interim Earnings Announcements written by Hannu J. Schadewitz and published by . This book was released on 2007 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study focuses on non-institutional trading behavior around interim earnings announcements in the emerging market. We separate the stock trading activity of Finnish households into five trading classes and compare the results to corresponding institutional trading. Data covering the years 1996-2000 shows that earnings news triggers trading in every trading classes. Before the event, especially active individuals show increased buying and selling activity compared to the non-event period. This finding supports Kim and Verrecchia's (1991a, b) proposition that announcement stimulates private information-gathering and trading. After the event we find that Finnish households in the most active investor class tend to follow a contrarian strategy, especially selling after the good news. This adds to previous evidence by Grinblatt and Keloharju (2000b). Further, individuals with active trading, perform better than the passive investors around the announcement. Finally, the impact of the announcement on institutional trading is clearly milder compared to that on the active investor classes.
Book Synopsis Chinese Institutional Trading, Stock Returns and Earnings Announcements by : Zhijuan Chen
Download or read book Chinese Institutional Trading, Stock Returns and Earnings Announcements written by Zhijuan Chen and published by . This book was released on 2014 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on Chinese institutional trading and its relation with stock returns. We use the data of institutional ownership of Topview from Shanghai Stock Exchange to get daily order flow of dealers and mutual funds. We first document that their daily order flow is persistent in the short run and they adopt momentum strategy only in the short run. At the same time, there is a positive relation between Chinese institutional investor trading and future return in the short run and a zero relation in the long run. Chinese institutional investor trading can predict neither earning surprise nor post-earning-announcement returns. Furthermore, we find that Chinese institutional investors seem to follow a news momentum trading strategy after earnings announcements.
Book Synopsis Institutional Trading and Corporate Earnings and Returns by : Mark H. Lang
Download or read book Institutional Trading and Corporate Earnings and Returns written by Mark H. Lang and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evide ...
Book Synopsis The Influence of Analysts, Institutional Investors, and Insiders on the Incorporation of Market, Industry, and Firm-Specific Information into Stock Prices by : Joseph D. Piotroski
Download or read book The Influence of Analysts, Institutional Investors, and Insiders on the Incorporation of Market, Industry, and Firm-Specific Information into Stock Prices written by Joseph D. Piotroski and published by . This book was released on 2013 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the extent to which the trading and trade-generating activities of three informed market participants -- financial analysts, institutional investors, and insiders -- influence the relative amount of firm-specific, industry-level and market-level information impounded into stock prices, as measured by stock return synchronicity. We find that stock return synchronicity is positively associated with analyst forecasting activities, consistent with analysts increasing the amount of industry-level information in prices through intra-industry information transfers. In contrast, stock return synchronicity is inversely related to insider trades, consistent with these transactions conveying firm-specific information. Supplemental tests show that insider and institutional trading accelerate the incorporation of the firm-specific component of future earnings news into prices alone, while analyst forecasting activity accelerates both the industry and firm-specific component of future earnings news. Our results suggest that all three parties influence the firm's information environment, but the type of price-relevant information conveyed by their activities depends on each party's relative information advantage.
Book Synopsis Differential Trading Patterns of Institutional Investors Surrounding the Release of Management Forecasts of Annual Earnings by : Timothy D. Cairney
Download or read book Differential Trading Patterns of Institutional Investors Surrounding the Release of Management Forecasts of Annual Earnings written by Timothy D. Cairney and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines differences in the trading patterns of institutions. Investee firms with different levels and types of institutions are also examined. A method is developed to categorize institutions as active or inactive. Changes in the level of information, changes in the CAR response, changes in the type of earnings surprise and changes in trading volume are examined to detect differences across institutional types. Significant differences in CAR responses are observed between active and inactive traders, even after controlling for information surprises. In addition, the type of earnings surprise, good news versus bad news, results in differences in trading patterns across different types of institutional investors. Differences in trading volume and the timing of trading volumes are documented, as well. Active institutions tend to hold prior to good news disclosures, but no such evidence is reported for bad news disclosures. Inactive institutions do not exchange shares at same time or in the same manner as active institutions. This suggests the acquisition of private information by active institutions, but not by inactive institutions.
Book Synopsis Informed Trading Before Positive Vs. Negative Earnings Surprises by : Kyojik Song
Download or read book Informed Trading Before Positive Vs. Negative Earnings Surprises written by Kyojik Song and published by . This book was released on 2017 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Exploiting Earnings Volatility by : Brian Johnson
Download or read book Exploiting Earnings Volatility written by Brian Johnson and published by . This book was released on 2015-04-08 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: Exploiting Earnings Volatility introduces an innovative new framework for evaluating, optimizing, and trading option strategies to profit from earnings-related pricing anomalies. Leveraging his extensive background in option-pricing and decades of experience in investment management and trading, Brian Johnson developed this inventive approach specifically to design and manage option earnings strategies. In an Active Trader article titled "Modeling Implied Volatility," Mr. Johnson introduced a formula for aggregating discrete volatility measures into a single metric that can be used with conventional option pricing formulas to accurately model implied volatility before and after earnings announcements. The practical application of this formula has profound implications for option trading and strategy development. Exploiting Earnings Volatility is written in a clear, understandable fashion and explains how to use this novel approach to 1) solve for the expected level of earnings volatility implicitly priced in an option matrix, 2) calculate historical levels of realized and implied earnings volatility, 3) develop strategies to exploit divergences between the two, and 4) calculate expected future levels of implied volatility before and after earnings announcements. Furthermore, Exploiting Earnings Volatility also includes two Excel spreadsheets. The Basic spreadsheet employs minimal input data to estimate current and historical earnings volatility and utilizes those estimates to forecast future levels of implied volatility around earnings announcements. The Integrated spreadsheet includes a comprehensive volatility model that simultaneously integrates and quantifies every component of real-world implied volatility, including earnings volatility. This powerful tool allows the user to identify the precise level of over or undervaluation of every option in the matrix and to accurately forecast future option prices and option strategy profits and losses before and after earnings announcements. The Integrated spreadsheet even includes an optimization tool designed to identify the option strategy with the highest level of return per unit of risk. Written specifically for investors who have familiarity with options, this practical guide begins with a detailed review of volatility and an explanation of the aggregate implied volatility formula. A separate chapter provides a conceptual and mathematical explanation of "True Greeks," accurate measures of risk and return sensitivity that reflect the real-world behavior of options. New option Greeks that are specific to earnings announcements are also introduced. Four chapters explain how to use the Basic and Integrated spreadsheets and two chapters document trade examples that use actual market data and analytical results from both spreadsheets to design a unique option strategy to exploit earnings-related pricing and volatility anomalies. The final chapter examines practical considerations and prospective applications of these innovative new tools. This book introduces a new analytical framework that may sound complicated at first, but is really quite intuitive. The formulas presented in the book are limited to basic high-school algebra. Mathematical relationships are also explained intuitively and depicted graphically. Most important, you will not need to perform any of these calculations manually. Exploiting Earnings Volatility includes a link to Excel spreadsheets that perform all of the calculations described in the book. The unique price and volatility behavior of options before and after discrete earnings announcements is an enigma to most option traders, even to many professionals. The aggregate volatility formula is relatively simple, but it has profound implications. When integrated with a real-world volatility model, it offers unique insights into earnings volatility, price behavior, option strategy construction, and prospective value-added opportunities.
