Small Trader Reactions To Consecutive Earnings Surprises

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Small Trader Reactions to Consecutive Earnings Surprises

Author : Devin M. Shanthikumar
Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Small Trader Reactions to Consecutive Earnings Surprises by : Devin M. Shanthikumar

Download or read book Small Trader Reactions to Consecutive Earnings Surprises written by Devin M. Shanthikumar and published by . This book was released on 2009 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Several analytical models explain post-earnings-announcement drift, momentum and mean-reversion by making assumptions about investor behavior. They posit that investors react more strongly as a series of similar earnings surprises continues. Related literature suggests that behavior should vary systematically with investor sophistication. This paper tests these claims by analyzing whether traders on the NYSE exhibit increasing reactions to a series of similar earnings surprises, and whether their behavior varies with trade size, a proxy for sophistication. Results show that smaller traders exhibit an increasing reaction, with significant increases between the first, second, and third surprise. The pattern is weaker for larger trade-size groups, disappearing for the largest. Controls for prior returns show that small traders generally act as contrarians and large traders as momentum traders, strengthening the results. Future drift is weaker for each subsequent surprise in a series, suggesting that increasing reactions are not attempts to capitalize on increasing returns.

Investor Trading and the Post Earnings Announcement Drift

Author : Benjamin C. Ayers
Publisher :
ISBN 13 :
Total Pages : 46 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Investor Trading and the Post Earnings Announcement Drift by : Benjamin C. Ayers

Download or read book Investor Trading and the Post Earnings Announcement Drift written by Benjamin C. Ayers and published by . This book was released on 2011 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether the two distinct post-earnings-announcement drifts associated with seasonal random walk-based and analyst-based earnings surprises are attributable to the trading activities of distinct sets of investors. We predict and find that small (large) traders continue to trade in the direction of seasonal random walk-based (analyst-based) earnings surprises after earnings announcements. We also find that when small (large) traders react more thoroughly to seasonal random walk- (analyst-) based earnings surprises at the earnings announcements, the respective drift attenuates. Further evidence suggests that delayed small trades associated with random walk-based surprises are consistent with small traders' failure to understand time-series properties of earnings, whereas delayed large trades associated with analyst-based surprises are more consistent with a longer price discovery process. We also find that the analyst-based drift has declined in recent years.

Trading on Corporate Earnings News

Author : John Shon
Publisher : FT Press
ISBN 13 : 0132615851
Total Pages : 225 pages
Book Rating : 4.1/5 (326 download)

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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.

Small and Large Trades Around Earnings Announcements

Author : Devin M. Shanthikumar
Publisher :
ISBN 13 :
Total Pages : 39 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Small and Large Trades Around Earnings Announcements by : Devin M. Shanthikumar

Download or read book Small and Large Trades Around Earnings Announcements written by Devin M. Shanthikumar and published by . This book was released on 2009 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes trade-initiation by small and large traders for one year following earnings announcements and examines the predictive ability of event-time trading for future returns. With earnings surprises based on a seasonal random walk expectations model, small traders react slightly more weakly than large traders, during the event window, to the first surprise in a series of similar surprises, but more strongly than large traders to the later surprises. With earnings surprises based on analyst forecasts, small traders react more weakly than large traders regardless of the past series. Large traders trade in the direction of the earnings surprise for one month after the earnings announcement, while small traders do not. Starting in month two this switches and small traders trade in the direction of the surprise, while large traders do not. The strength of the small trade event-time reaction is a weak positive predictor of returns in the first month after the announcement and a weak negative predictor of drift after the first month. Large trade reaction is generally a negative predictor of future drift. The collection of evidence points to both small and large trader underreaction to earnings announcements, with small trader underreaction more severe in the first month. In month one, large traders capitalize on drift, but after that small traders seem to correct and possibly overreact.

A Fast and Frugal Finance

Author : William P. Forbes
Publisher : Academic Press
ISBN 13 : 0128124962
Total Pages : 278 pages
Book Rating : 4.1/5 (281 download)

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Book Synopsis A Fast and Frugal Finance by : William P. Forbes

Download or read book A Fast and Frugal Finance written by William P. Forbes and published by Academic Press. This book was released on 2019-11-15 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Fast and Frugal Finance: Bridging Contemporary Behavioural Finance and Ecological Rationality adds psychological reality to classical financial reasoning. It shows how financial professionals can reach better and quicker decisions using the 'fast and frugal' framework for decision-making, adding dramatically to time and outcome efficiency, while also retaining accuracy. The book provides the reader with an adaptive toolbox of heuristic tools and classification systems to aid real-world decisions. Throughout, financial applications are presented alongside real-world examples to help readers solve established problems in finance, including stock buying and selling decisions, when faced with not only risk but fundamental uncertainty. The book concludes by describing potential solutions to financial problems in the forefront of contemporary debates, and calls for taking psychological insights seriously. - Demonstrates how well-constructed 'fast and frugal' models can outperform standard models in time and outcome efficiency - Focuses on how financial decisions are made in reality, using heuristics, rather than how such decisions should be made - Discusses how cognition and the decision-making context interact in producing 'fast and frugal' choices that follow ecological rationality - Explores the development of decision-making trees in finance to aid in decision-making

The Physical Foundation of Economics

Author : Jing Chen
Publisher : World Scientific
ISBN 13 : 9812563237
Total Pages : 147 pages
Book Rating : 4.8/5 (125 download)

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Book Synopsis The Physical Foundation of Economics by : Jing Chen

Download or read book The Physical Foundation of Economics written by Jing Chen and published by World Scientific. This book was released on 2005 with total page 147 pages. Available in PDF, EPUB and Kindle. Book excerpt: All human activities, including mental activities, are governed by physical laws and are essentially thermodynamic processes. However, current economic theories are not established on these foundations. This pioneering book seeks to develop an analytical theory of economics on the foundation of thermodynamic laws. A unified understanding of economic and social phenomena is presented, an understanding that is much simpler than what mainstream economic theory has to offer. Its aim is to revolutionize thinking in economics and transform social sciences into an integral part of the physical and biological sciences.

Advances in Quantitative Analysis of Finance and Accounting (New Series) Vol．14

Author : Cheng F. Lee
Publisher : Center for PBBEFR & Airiti Press
ISBN 13 : 9864371290
Total Pages : pages
Book Rating : 4.8/5 (643 download)

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Book Synopsis Advances in Quantitative Analysis of Finance and Accounting (New Series) Vol．14 by : Cheng F. Lee

Download or read book Advances in Quantitative Analysis of Finance and Accounting (New Series) Vol．14 written by Cheng F. Lee and published by Center for PBBEFR & Airiti Press. This book was released on 2016-01-01 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession.

Regulating Competition in Stock Markets

Author : Lawrence R. Klein
Publisher : John Wiley & Sons
ISBN 13 : 1118236866
Total Pages : 403 pages
Book Rating : 4.1/5 (182 download)

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Book Synopsis Regulating Competition in Stock Markets by : Lawrence R. Klein

Download or read book Regulating Competition in Stock Markets written by Lawrence R. Klein and published by John Wiley & Sons. This book was released on 2012-04-25 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: A guide to curbing monopoly power in stock markets Engaging and informative, Regulating Competition in Stock Markets skillfully analyzes the impact of the recent global financial crisis on health and happiness, and uses this opportunity to put regulatory systems in perspective. Happiness is lost because of emotional and physical health deterioration resulting from the crisis. Therefore, the authors conclude that financial crisis prevention should be the focus of public policy. This book is the most comprehensive study so far on potential risks to the stock market, especially various forms of market manipulation that lead to mania and eventual crisis. Based on litigation cases from international stock markets, and borrowing multidisciplinary findings in the fields of finance, economics, accounting, media studies, criminology, legal studies, psychology, and medicine, this book is the first to provide thorough micro-level regulatory proposals rooted in financial reality. By focusing on securities trading, they apply antitrust measures to limiting monopolistic power that is used for the manipulation of investors' perception and monopolistic profit. These proposals are quantifiable, adjustable, inexpensive, and can be easily implemented by any securities regulating agency for real-time oversight and daily operations. The recommendations found here are intended to improve the fairness and transparency of the financial markets, thereby perfecting the market competition, protecting investors, stabilizing the market, and preventing crises Explores how avoiding crises can to contribute to a more scientific, health aware, and civilized economic and social development Written by a team of authors who have extensive experience in this dynamic field, including Nobel Laureate Lawrence R. Klein Since the founding of the first, organized stock exchange in Amsterdam 400 years ago, no systematic economic research results on stock markets have been implemented in stock market regulation around the world. Regulating Competition in Stock Markets aims to fill this void.

The Mathematics of Options

Author : Michael C. Thomsett
Publisher : Springer
ISBN 13 : 3319566350
Total Pages : 345 pages
Book Rating : 4.3/5 (195 download)

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Book Synopsis The Mathematics of Options by : Michael C. Thomsett

Download or read book The Mathematics of Options written by Michael C. Thomsett and published by Springer. This book was released on 2017-08-30 with total page 345 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is written for the experienced portfolio manager and professional options traders. It is a practical guide offering how to apply options math in a trading world that demands mathematical measurement. Every options trader deals with an array of calculations: beginners learn to identify risks and opportunities using a short list of strategies, while researchers and academics turn to advanced technical manuals. However, almost no books exist for the experienced portfolio managers and professional options traders who fall between these extremes. Michael C. Thomsett addresses this glaring gap with The Mathematics of Options, a practical guide with actionable tools for the practical application of options math in a world that demands quantification. It serves as a valuable reference for advanced methods of evaluating issues of pricing, payoff, probability, and risk. In his characteristic approachable style, Thomsett simplifies complex hot button issues—such as strategic payoffs, return calculations, and hedging options—that may be mentioned in introductory texts but are often underserved. The result is a comprehensive book that helps traders understand the mathematic concepts of options trading so that they can improve their skills and outcomes.

Earnings Announcements, Order Flow, and Returns

Author : Laura Frieder
Publisher :
ISBN 13 :
Total Pages : 46 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Earnings Announcements, Order Flow, and Returns by : Laura Frieder

Download or read book Earnings Announcements, Order Flow, and Returns written by Laura Frieder and published by . This book was released on 2005 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is concerned with trading patterns around earnings announcements. We analyze order imbalances (buy orders less sell orders) following earnings surprises to determine if traders invest in a manner that is consistent with the representativeness heuristic (manifested by undue extrapolation of perceived patterns in random sequences). We then test whether such trading patterns affect returns. Our stimulus for this bias is a string of same-sign earnings surprises. Though not justified by subsequent price performance, we uncover evidence that investors extrapolate past trends in earnings performance. Specifically, following strings of consecutive positive earnings surprises, the amount of net buying after controlling for other regularities in trading activity is significantly greater than it is after an isolated positive surprise. This difference is increasing in the number of consecutive positive surprises in the string. Furthermore, subsequent to strings, purchasing activity is negatively correlated with returns throughout the remainder of the year.

Dissertation Abstracts International

Author :
Publisher :
ISBN 13 :
Total Pages : 672 pages
Book Rating : 4.F/5 ( download)

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Book Synopsis Dissertation Abstracts International by :

Download or read book Dissertation Abstracts International written by and published by . This book was released on 2008 with total page 672 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Streaks in Earnings Surprises and the Cross-section of Stock Returns

Author : Roger Loh
Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Streaks in Earnings Surprises and the Cross-section of Stock Returns by : Roger Loh

Download or read book Streaks in Earnings Surprises and the Cross-section of Stock Returns written by Roger Loh and published by . This book was released on 2013 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The gambler's fallacy (Rabin, 2002) predicts that trends bias investor expectations. Consistent with this prediction, we find that investors underreact to streaks of consecutive earnings surprises with the same sign. When the most recent earnings surprise extends a streak, post-earnings announcement drift is strong and significant. In contrast, the drift is negligible following the termination of a streak. Indeed, streaks explain about half of the post-earnings announcement drift in our sample. Our results are robust to more general definitions of trends than streaks and a battery of control variables including the magnitude of earnings surprises and their autocorrelation. Overall, post-earnings announcement drift has a significant time-series component that is consistent with the gambler's fallacy.

Investors' Differential Reaction to Positive Versus Negative Earnings Surprises

Author : Arianna S. Pinello
Publisher :
ISBN 13 :
Total Pages : 40 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Investors' Differential Reaction to Positive Versus Negative Earnings Surprises by : Arianna S. Pinello

Download or read book Investors' Differential Reaction to Positive Versus Negative Earnings Surprises written by Arianna S. Pinello and published by . This book was released on 2007 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Archival studies document an asymmetrically strong market reaction to positive vis-agrave;-vis negative earnings surprises. This finding appears inconsistent with the well-known effect of loss aversion and remains unexplained. I contend that this reaction pattern can arise when investors' earnings expectations do not coincide with analyst forecasts. Numerous studies document optimistic biases in analyst forecasts. If investors perceive optimistic biases in analyst forecasts, their earnings expectations will be lower than analyst forecasts. Because the contrast between the obtained and the expected outcome determines the degree of perceived surprise, an investor expectation which is below the analyst forecast results in a larger (smaller) perceived earnings surprise than reported when the surprise is positive (negative). Investors' lower expectations relative to analyst forecasts therefore result in a stronger reaction to positive than to negative reported earnings surprises of equivalent magnitude. In a controlled experiment, I replicate the asymmetrically strong reaction to positive reported earnings surprises, and trace this reaction pattern to investors' perceptions of these surprises. I further show that when earnings surprises are measured based on investors' perception of those surprises, the differential reaction pattern reverses: investors react asymmetrically strong to negative vis-agrave;-vis positive perceived earnings surprises, consistent with loss aversion. My findings carry implications for investors and accounting researchers.

Swing and Day Trading

Author : Thomas N. Bulkowski
Publisher : John Wiley & Sons
ISBN 13 : 1118516966
Total Pages : 319 pages
Book Rating : 4.1/5 (185 download)

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Book Synopsis Swing and Day Trading by : Thomas N. Bulkowski

Download or read book Swing and Day Trading written by Thomas N. Bulkowski and published by John Wiley & Sons. This book was released on 2013-01-08 with total page 319 pages. Available in PDF, EPUB and Kindle. Book excerpt: Comprehensive coverage of the four major trading styles Evolution of a Trader explores the four trading styles that people use when learning to trade or invest in the stock market. Often, beginners enter the stock market by: Buying and holding onto a stock (value investing). That works well until the trend ends or a bear market begins. Then they try Position trading. This is the same as buy-and-hold, except the technique sells positions before a significant trend change occurs. Swing trading follows when traders increase their frequency of trading, trying to catch the short-term up and down swings. Finally, people try Day trading by completing their trades in a single day. This series provides comprehensive coverage of the four trading styles by offering numerous tips, sharing discoveries, and discussing specific trading setups to help you become a successful trader or investor as you journey through each style. Trading Basics takes an in-depth look at money management, stops, support and resistance, and offers dozens of tips every trader should know. Fundamental Analysis and Position Trading discusses when to sell a buy-and-hold position, uncovers which fundamentals work best, and uses them to find stocks that become 10-baggers—stocks that climb by 10 times their original value. Swing and Day Trading reveals methods to time the market swings, including specific trading setups, but it covers the basics as well, such as setting up a home trading office and how much money you can make day trading.

Do Bright-Line Earnings Surprises Really Affect Stock Price Reactions?

Author : Jeffery S. Abarbanell
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Do Bright-Line Earnings Surprises Really Affect Stock Price Reactions? by : Jeffery S. Abarbanell

Download or read book Do Bright-Line Earnings Surprises Really Affect Stock Price Reactions? written by Jeffery S. Abarbanell and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Several influential studies have concluded that earnings surprises just to the right or to the left of a hypothesized bright line produce distinct price reactions compared to the surrounding earnings surprises because they convey special meaning. In this study, we examine whether previous inferences of asymmetric stock price reactions to bright-line surprises are observed when empirical tests are designed to be consistent with a rational expectations equilibrium. Focusing on a small range of earnings surprises around hypothesized bright lines, we find no evidence of asymmetric price reactions once investors' ex ante expectation of bias in earnings surprises is controlled. Results from additional tests yield support for the external validity of the theoretical framework underlying our bright-line pricing tests. Our findings suggest simple refinements to traditional bins-comparison and regression tests for asymmetric price reactions to bright-line earnings surprises, which account for necessary conditions implied by a rational expectations equilibrium.

JOURNAL OF Accounting & Economics

Author :
Publisher :
ISBN 13 :
Total Pages : 832 pages
Book Rating : 4./5 ( download)

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Book Synopsis JOURNAL OF Accounting & Economics by :

Download or read book JOURNAL OF Accounting & Economics written by and published by . This book was released on 2004 with total page 832 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Trading The China Market with American Depository Receipts

Author : Alan Voon
Publisher : John Wiley & Sons
ISBN 13 : 1118316029
Total Pages : 189 pages
Book Rating : 4.1/5 (183 download)

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Book Synopsis Trading The China Market with American Depository Receipts by : Alan Voon

Download or read book Trading The China Market with American Depository Receipts written by Alan Voon and published by John Wiley & Sons. This book was released on 2013-01-01 with total page 189 pages. Available in PDF, EPUB and Kindle. Book excerpt: Discover the secrets of trading the Chinese markets with American Depository Receipts Introducing a new way to make virtually risk-free profits, Trading the China Market with American Depository Receipts teaches readers how to successfully trade U.S. listed American Depository Receipts (ADRs) of Chinese stocks . . . by using information that comes to light outside of Asian trading hours, but while the U.S. markets are still open. Filled with successful strategies for profitable trading made possible by interpreting business news to buy or short China ADRs before the information impacts those markets the next day, the book walks readers through this incredible opportunity step-by-step. Filled with case studies that show the success of the strategies outlined, the book explains where to look for price-moving information. Aimed at investors of all types who have access to a brokerage account that can trade U.S. securities—including online brokers—Trading the China Market with American Depository Receipts is the ultimate guide to making money from China in your own backyard. Explains incredible new strategies for trading U.S. listed ADRs of Chinese stocks using information released after the Asian markets have closed for the day Includes case studies that clearly show how this strategy has worked and continues to work Features lists of relevant underlying shares and their corresponding ADRs A low-risk strategy for profiting from foreign markets, Trading the China Market with American Depository Receipts shows how to use the U.S.-China time difference for profit.