An Empirical Analysis Of The Effects Of Online Trading On Investor Reactions To Earnings Announcements PDF Download
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| Author | : Anwer S. Ahmed |
| Publisher | : |
| Total Pages | : 41 |
| Release | : 2002 |
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Download An Empirical Analysis of the Effects of Online Trading on Investor Reactions to Earnings Announcements Book in PDF, ePub and Kindle
This study provides evidence regarding the effects of online trading on stock market reactions to quarterly earnings announcements. We test for differences in stock price and volume reactions to quarterly earnings announcements between a period with a significant amount of online trading (1996-1999) and a period without online trading (1992-1995). We conjecture that online trading has increased the proportion of naive investors in the market. Based on noisy rational expectations models of trade, we predict that this will result in larger stock price and trading volume reactions to earnings announcements. We find strong evidence in support of these predictions. The stock price results suggest that the advent of online trading has decreased average prior precision and the trading volume results suggest that online trading has increased differential belief revisions around earnings announcements. An analysis of the relation between volume reactions and price reactions in both periods suggests that the increase in differential belief revisions is primarily due to an increase in the differential interpretation of earnings announcements in the online trading period. Our findings are relevant for assessing the validity of concerns about online trading expressed by regulators and the validity of theoretical models of trade with asymmetrically informed investors.
| Author | : Anwer S. Ahmed |
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| Total Pages | : |
| Release | : 2005 |
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Download An Empirical Analysis of the Effects of Online Trading on Stock Price and Trading Volume Reactions to Earnings Announcements Book in PDF, ePub and Kindle
This study provides evidence on the effects of online trading on stock price and trading volume reactions to quarterly earnings announcements. We test for differences in stock price and volume reactions to quarterly earnings announcements between a period with a significant amount of online trading (1996-1999) and a period without online trading (1992-1995). We conjecture that online trading has increased the proportion of naive investors in the market. We predict that this will result in (i) a decrease in the average precision of investor information prior to earnings announcements implying higher ERCs, (ii) an increase in differential interpretation of earnings leading to higher trading volume reactions that are unrelated to price change, and (iii) a decrease in differential prior precision leading to a decrease in the association between trading volume and absolute price change. We find evidence consistent with all three predictions. Our findings are relevant for assessing the validity of concerns about online trading expressed by regulators and the validity of theoretical models of trade with asymmetrically informed investors.
| Author | : Neil Bhattacharya |
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| Total Pages | : |
| Release | : 2013 |
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Download Investors' Trade Size and Trading Responses Around Earnings Announcements Book in PDF, ePub and Kindle
Prior research suggests that the earnings expectations of a segment of the market can be described by the seasonal random-walk model. Prior research also provides evidence that less wealthy and less informed investors tend to make smaller trades (small traders) than wealthier and better informed investors (large traders).I hypothesize that it is the earnings expectations of small traders that are associated with predictions from the seasonal random-walk model. By directly analyzing the trading activities of small and large traders, this study provides evidence that is largely consistent with the hypotheses.Specifically, small traders' trading response around earnings announcements is increasing in the magnitude of seasonal random-walk forecast errors even after controlling for absolute analyst forecast errors, contemporaneous price changes, and market-wide trading. Supplementary analysis reveals that this effect is largely confined to firms with relatively impoverished information environments (i.e., smaller firms and firms with little to moderate analyst following).
| Author | : Orie E. Barron |
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| Total Pages | : 53 |
| Release | : 2016 |
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Download The Changing Behavior of Trading Volume Reactions to Earnings Announcements Book in PDF, ePub and Kindle
The increase in investor diversity over the last 35-40 years (ICI 2014) prompted us to revisit trading volume reactions to earnings announcements and how these reactions vary with firm size. This increase in investor diversity would likely lead to an increase in differences in the precision of pre-announcement information and potentially increase the importance of earnings announcements to resolve investor disagreement. We find that the nature of trading volume reactions to earnings announcements has fundamentally changed over the 35-year time period 1977-2011. There has been a dramatic increase in the magnitude and frequency of volume reactions to earnings announcements over this time period, and this effect is more pronounced in large firms where volume reactions were previously infrequent. The increase in large firms' trading volume reactions is so pronounced that the relation between volume reactions and firm size has turned positive in recent years, thereby reversing Bamber's (1986, 1987) previously documented negative relation. We provide intuition and empirical evidence that our results are attributable to the resolution of differential prior precision among an increasingly diverse set of investors following large firms.
| Author | : Mikhail Pevzner |
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| Total Pages | : 72 |
| Release | : 2015 |
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Download When Firms Talk, Do Investors Listen? The Role of Trust in Stock Market Reactions to Corporate Earnings Announcements Book in PDF, ePub and Kindle
We examine whether the level of trust in a country affects investors' perception and utilization of information transmitted by firms through financial disclosure. Specifically, we investigate the effect of societal trust on investor reactions to corporate earnings announcements. We test two competing hypotheses: on the one hand, corporate earnings announcements are perceived as more credible by investors in more trusting societies and therefore elicit stronger investor reactions; on the other hand, societal trust mitigates outside investors' concern of moral hazard and reduces the value of corporate earnings announcements to them, thereby weakening their reactions to these events. We analyze the abnormal trading volume and abnormal stock return variance during the earnings announcement period in a large sample of firm-year observations across 25 countries, and find that both measures of investor reactions to earnings announcements are significantly higher in more trusting countries. We also find that the positive effect of societal trust on investor reactions to earnings news is more pronounced (1) when a country's investor protection and disclosure requirements are weaker, suggesting that trust acts as a substitute for formal institutions, (2) when a country's average education level is lower, consistent with less educated people relying more on trust in making economic decisions, and (3) when firm level information asymmetry is higher, supporting the notion that trust plays a more important role in poorer information environments.
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| Release | : 2015 |
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Download The Disposition Effect and Investors' Reaction to Earnings Announcements Book in PDF, ePub and Kindle
This paper analyzes the way in which the disposition effect, which is the tendency to realize gains before losses, influences investors' reaction to earnings announcements. The research investigates the impact of this behavioral bias both in the announcement window and in the medium term, using a single sample for both the analyses; the sample covers earnings announcements of US stocks between year 1992 and 2014. I find that those stocks that are in aggregate loss tend to perform better during the announcement window than those that are in aggregate gain, ceteris paribus. In the medium term, this market inefficiency is cancelled out, and those stocks that are in positive capital gain at the moment of the announcement perform better in the following sixty trading days than those trading at a loss; the relative difference in performance generates quarterly alphas of almost 300 basis points. The influence of the disposition effect is also certified by a reversion of this reaction for those earnings announcements that take place during December; due to tax reasons, investors realize losses rather than gains during December, producing then an opposite reaction to earnings announcements. The final proof of the influence of the disposition effect comes from the analysis of volumes: during the announcement window, investors are more prone to trade stocks that are in aggregate gain, generating thus a higher trading volume for these stocks; this effect is reverted during December.
| Author | : Y. Zhang |
| Publisher | : Springer |
| Total Pages | : 301 |
| Release | : 2014-12-04 |
| Genre | : Business & Economics |
| ISBN | : 1137372591 |
Download Stock Message Boards Book in PDF, ePub and Kindle
Stock Message Boards provides empirical data to reveal how online communication not only impacts stock returns, but also volatility, trading volume, and liquidity, as well as an investing firm's value and reputation.
| Author | : VICTOR L. BERNARD |
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| Total Pages | : 44 |
| Release | : 1992 |
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Download STOCK PRICE REACTIONS TO EARNINGS ANNOUNCEMENTS: A Book in PDF, ePub and Kindle
| Author | : Alex Frino |
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| Total Pages | : 46 |
| Release | : 2015 |
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Download Are Algorithmic Trades Informed? - An Empirical Analysis of Algorithmic Trading Around Earnings Announcements Book in PDF, ePub and Kindle
This study examines the impact of corporate earnings announcements on trading activity and speed of price adjustment, analyzing algorithmic and non-algorithmic trades during the immediate period pre- and post- corporate earnings announcements. We confirm that algorithms react faster and more correctly to announcements than non-algorithmic traders. During the initial surge in trading activity in the first 90 seconds after the announcement, algorithms time their trades better than non-algorithmic traders, hence algorithms tend to be profitable, while non-algorithmic traders make losing trades over the same time period. During the pre announcement period, non-algorithmic volume imbalance leads algorithmic volume imbalance, however, in the post announcement period, the direction of the lead-lag relationship is exactly reversed. Our results suggest that as algorithms are the fastest traders, their trading accelerates the information incorporation process.
| Author | : Markku J. Vieru |
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| Total Pages | : 35 |
| Release | : 2005 |
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Download Impact of Investors' Trading Activity to Post-Earnings Announcement Drift Book in PDF, ePub and Kindle
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).
