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Passive Informed Trading Around Earnings Announcements
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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 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 Market Fragmentation and Post-Earnings Announcements Drift by : Justin Cox
Download or read book Market Fragmentation and Post-Earnings Announcements Drift written by Justin Cox and published by . This book was released on 2019 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the effects of dark and lit market fragmentation around both earnings announcements and earnings surprises. I find that both dark and lit market fragmentation increase around earnings announcements. I further test whether dark and lit fragmentation hinders the level of price discovery around the earnings announcement, resulting in greater post-earnings announcement drift, PEAD. My analysis reveals that lit fragmentation has no significant impact on PEAD while dark fragmentation reduces the level of PEAD for stocks with positive earnings surprises consistent with the notion that dark venues capture more uninformed trading around positive news events, resulting in greater informed trading and higher informational efficiency on the lit venue. However, my results also indicate that dark fragmentation leads to stronger PEAD for stocks with negative earnings surprises. This last finding suggests that informed traders migrate to dark venues around negative earnings surprise, consistent with previous literature that argues informed traders follow passive trading strategies around negative news events.
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 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 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 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 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 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 Information Based Trading Surrounding Earnings Announcements by : Joseph Berr Paperman
Download or read book Information Based Trading Surrounding Earnings Announcements written by Joseph Berr Paperman and published by . This book was released on 1997 with total page 370 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 So What Orders Do Informed Traders Use? Evidence from Quarterly Earnings Announcements by : Hsiao-Fen Yang
Download or read book So What Orders Do Informed Traders Use? Evidence from Quarterly Earnings Announcements written by Hsiao-Fen Yang and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines what orders informed traders use before quarterly earnings announcements. In particular, we investigate whether informed traders prefer median orders and market orders right before quarterly earnings announcements. Quarterly earnings announcements are anticipated events. Because informed traders expect their information advantage will disappear after the announcements, this information event provides a unique opportunity to test whether informed traders become more impatient and use more aggressive orders when the announcement is approaching. Our results show that when the information will be released soon but there is still enough time for the execution (from day -10 to day -6), informed investors use small orders and limit orders to trade stealthily and reduce price risk. Within five days right before the announcements, informed investors trade more aggressively. They start using large market orders to ensure the execution and high profits. Our findings that informed traders change their preference for order type and order size over time shed new light on the ongoing debate on the order submission strategies by informed traders.
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 High-Frequency Measures of Informed Trading and Corporate Announcements by : Michael J. Brennan
Download or read book High-Frequency Measures of Informed Trading and Corporate Announcements written by Michael J. Brennan and published by . This book was released on 2017 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study informed trading around announcements of merger bids (M&AD) and quarterly earnings (EAD). Extending the EKOP (1996) approach, we compute the daily posterior probabilities of informed trading on good and bad news. We find evidence of informed trading before and after M&AD and EAD. A significant part of the merger bid premium is impounded in stock prices prior to the announcement by informed buying. Post-M&AD informed trading predicts subsequent stock returns and the probabilities that the bid will be withdrawn or met with a competing bid. Pre-EAD informed trading also attenuates the price response to the announcement, and post-EAD informed trading predicts subsequent stock returns.
Book Synopsis Information Content of Earnings Announcements by : Christine X. Jiang
Download or read book Information Content of Earnings Announcements written by Christine X. Jiang and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We study after-hours trading (AHT), price contributions, and price discovery following quarterly earnings announcements released outside of the normal trading hours. For Standard & Poor's (S&P) 500 index stocks from 2004-2008, AHT is heightened on announcement days. A significant portion of the price change and price discovery occurs immediately after the earnings releases. Prices in AHT show a large degree of informational efficiency, further demonstrating the importance of price discovery in AHT. We also provide evidence suggesting that firms prefer after-hours earnings announcements, as trades are mainly from informed traders, and those trades are relied upon to convey information to the general public.
Book Synopsis Spreads, Depths, and the Impact of Earnings Information by : Charles M. C. Lee
Download or read book Spreads, Depths, and the Impact of Earnings Information written by Charles M. C. Lee and published by . This book was released on 1992 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
