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Individual And Institutional Informed Trading In Competing Firms Around Earnings Announcements
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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 Informed Trading Behavior of Institutions and Individuals Around Earnings Announcements by : Yu-Chen Wei
Download or read book Informed Trading Behavior of Institutions and Individuals Around Earnings Announcements written by Yu-Chen Wei and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
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 Informed Trading Before Positive Vs. Negative Earnings Surprises by : Tae Jun Park
Download or read book Informed Trading Before Positive Vs. Negative Earnings Surprises written by Tae Jun Park and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Who Trades During Earnings Announcements? Evidence from Torq Data by : Malay K. Dey
Download or read book Who Trades During Earnings Announcements? Evidence from Torq Data written by Malay K. Dey and published by . This book was released on 2011 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
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 Individual investor trading and return patterns around earnings announcements by : Ron Kaniel
Download or read book Individual investor trading and return patterns around earnings announcements written by Ron Kaniel and published by . This book was released on 2011 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Evidence of Informed Trading Prior to Earnings Announcements by : John Affleck-Graves
Download or read book Evidence of Informed Trading Prior to Earnings Announcements written by John Affleck-Graves and published by . This book was released on 2014 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Passive Informed Trading Around Earnings Announcements by : Brian Roseman
Download or read book Passive Informed Trading Around Earnings Announcements written by Brian Roseman and published by . This book was released on 2018 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis The Impact of Interim Earnings Announcements on the Permanent Price Effects of Trades on the Helsinki Stock Exchange by : Markku J. Vieru
Download or read book The Impact of Interim Earnings Announcements on the Permanent Price Effects of Trades on the Helsinki Stock Exchange written by Markku J. Vieru and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Information, Trading and Product Market Interactions by : Heather Elise Tookes
Download or read book Information, Trading and Product Market Interactions written by Heather Elise Tookes and published by . This book was released on 2003 with total page 592 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Signal Quality of Earnings Announcements by : Lu Xie
Download or read book The Signal Quality of Earnings Announcements written by Lu Xie and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the revealed preference of informed traders to infer the extent to which earnings announcements are informative of subsequent stock price responses. From 2011 to 2015, a cartel of sophisticated traders illegally obtained early access to firm press releases prior to publication and traded over 1,000 earnings announcements. I study their constrained profit maximization: which earnings announcements they chose to trade vs. which ones they forwent trading. Consistent with theory, these traders targeted more liquid earnings announcements with larger subsequent stock price movement. Despite earning large profits overall, the informed traders enjoyed only mixed success in identifying the biggest profit opportunities. Controlling for liquidity differences, only 31% of their trades were in the most extreme announcement period return deciles. I model the informed traders' tradeoff between liquidity and expected returns. From this model, I recover an average signal-to-noise ratio of 0.4. I further explore two potential economic sources of this noise: (i) ambiguous market expectations of earnings announcements and (ii) heterogeneous interpretations of earnings information by the marginal investor. Empirically, I document that the informed traders avoided noisier earnings announcements as measured by both sources of noise.
Book Synopsis Trading Volume Around Firm-Specific Announcements by : Priyantha Mudalige
Download or read book Trading Volume Around Firm-Specific Announcements written by Priyantha Mudalige and published by . This book was released on 2013 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the impact of timing of the release of firm-specific announcements on trading volume of individual and institutional investors. We use trading data in five-minute intervals to capture the immediate impact of announcements on the trading volume. We find that individual investors exhibit positive and significant abnormal volume prior to, issued capital announcements and after earnings announcements. However, institutions exhibit significant and positive abnormal volume prior to, and after earnings, periodic and issued capital announcements. Notably, both individual and institutional investors do not exhibit significant abnormal volume prior to, and after dividend announcements. Furthermore, individual (institutional) investors' buy (sell) volume is significantly higher than sell (buy) volume prior to, and after scheduled and unscheduled announcements. Our results suggest that timing of the release of firm-specific announcements influences investor trading volume.
Book Synopsis Digital Insiders and Informed Trading Before Earnings Announcements by : Henk Berkman
Download or read book Digital Insiders and Informed Trading Before Earnings Announcements written by Henk Berkman and published by . This book was released on 2019 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: While it is widely acknowledged that companies face increasing cybersecurity risk stemming from hackers stealing customer information, a relatively unknown cybersecurity risk is from information leakage and subsequent trading by digital insiders - hackers who target corporations to obtain non-public corporate information for illegal trading. We use a firm-specific measure of cybersecurity risk mitigation based on textual analysis of 10-Ks to proxy for the organization's ability to reduce the probability of digital insider trading. We find that a larger share of new earnings information is incorporated into prices prior to earnings announcements for firms with low cybersecurity risk mitigation scores. We also find that pre-announcement trading by short sellers is more predictive of earnings surprises for firms with low cybersecurity risk mitigation. Further, on days closer to earnings announcements, firms with relatively low cybersecurity risk mitigation scores experience a larger increase in bid-ask spreads, particularly the adverse selection component. These results suggest that weak cybersecurity risk mitigation provides opportunities for acquisition of private information and that trading by privately informed traders is more likely in stocks of firms with higher exposure to cybercrimes.
Book Synopsis Informed Institutional Trading and News Announcements by : Guohua Li
Download or read book Informed Institutional Trading and News Announcements written by Guohua Li and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the daily institutional investors trading patterns before and after public news announcements in the US equity market, such as Merger and Acquisition announcement and release of macroeconomic indicators. Do institutional investors have inside information, or do they have superior models before news announcement? Using a high frequency institutional trading dataset that combines intraday NYSE Trades and Quotes (TAQ) data with the quarterly institutional ownership report (13F) by a reduced-form model, this dissertation tests the hypothesis of institutional investors trading on inside information 1993 to 2004. I find that most institutional investors are informed traders who accumulate shares before good news or before takeover announcements as early as 30 days ahead. Institutional investors do not have superior models in that they only buy the actual future targets and sell the forecasted "rumor" stocks from an acquisition probability model. By reversing their positions on and after the announcement day, they realize positive profits. Further, I confirm that the pre-event trading pattern of institutional investors is associated with stocks that have high probability of informed trading.
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:
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.
