Investor attention and stock market under-reaction to earnings announcements: Evidence from the options market

2017 ◽  
Vol 38 (4) ◽  
pp. 478-492 ◽  
Author(s):  
Xuewu Wesley Wang ◽  
Zhipeng Yan ◽  
Qunzi Zhang ◽  
Xuechen Gao
Keyword(s):  
Stock Market ◽  
Earnings Announcements ◽  
Options Market ◽  
Investor Attention

scholarly journals EARNINGS ANNOUNCEMENTS AND COMPETING INFORMATION: THE INDONESIAN EVIDENCE

2015 ◽  
Vol 29 (1) ◽  
Author(s):  
Dedhy Sulistiawan ◽  
Jogiyanto Hartono ◽  
Eduardus Tandelilin ◽  
Supriyadi Supriyadi
Keyword(s):  
Stock Market ◽  
Empirical Evidence ◽  
Earnings Announcements ◽  
Negative Relationship ◽  
Technical Analysis ◽  
Earnings Announcement ◽  
Price Reaction ◽  
Price Reactions ◽  
The Relationship ◽  
The U.S

The main purpose of this study is to provide empirical evidence of the relationship betweeninvestors’ responses to two events, which are, (1) earnings anouncements, and (2) technicalanalysis signals, as competing information. This study is motivated by Francis, et al. (2002),whose study used stock analyst’s recommendations as competing information in the U.S stockmarket. To extend that idea, this study uses technical analysis signals as competing informationin the Indonesian stock market. Using Indonesian data from 2007-2012, this study shows thatthere are price reactions on the day of a technical analysis signal’s release, which is prior toearnings announcements. It means that investors react to the emergence of competinginformation. Reactions on earnings announcements also produce a negative relationship withthe reaction to a technical analysis signal before an earnings announcement. This study givesevidence about the importance of technical analysis as competing information to earningsannouncements.Keywords: competing information, earnings announcements, technical analysis, price reaction

The effect of option transaction costs on informed trading in the options market around earnings announcements

2020 ◽  
Vol 47 (5-6) ◽  
pp. 615-644
Author(s):  
Suresh Govindaraj ◽  
Yubin Li ◽  
Chen Zhao
Keyword(s):  
Transaction Costs ◽  
Earnings Announcements ◽  
Informed Trading ◽  
Options Market

Volatility Spread and the Stock Market Response to Earnings Announcements

2014 ◽  
Author(s):  
Xuewu Wesley Wang ◽  
Qin Lei
Keyword(s):  
Stock Market ◽  
Earnings Announcements ◽  
Market Response

Investor attention and market correction

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zhongdong Chen
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Trading Behavior ◽  
Investor Attention ◽  
Information Effect ◽  
Content Type ◽  
Economic Significance ◽  
New Information ◽  
Positive Volume ◽  
The Impact

PurposeThis study disentangles the investor-base effect and the information effect of investor attention. The former leads to a larger investor base and higher stock returns, while the latter facilitates the dissemination of information among investors and impacts informational trading.Design/methodology/approachUsing positive volume shocks as a proxy for increased investor attention, this study evaluates the impacts of the investor-base effect and the information effect of investor attention on market correction following extreme daily returns in the US stock market from 1966 to 2018.FindingsThis study finds that the investor-base effect increases subsequent returns of both daily winner and daily loser stocks. The information effect leads to economically less significant return reversals for both the daily winner and daily loser stocks. These two effects tend to have economically more significant impacts on the daily loser stocks. The economic significance of these two effects is also related to firm size and the state of the stock market.Originality/valueThis study is the first to disentangle the investor-base effect and the information effect of increased investor attention. The evidence that the information effect facilitates the dissemination of new information and impacts stock returns contributes to the strand of studies on the impact of investor attention on market efficiency. This evidence also contributes to the strand of studies analyzing the impact of informational trading on stock returns. In addition, this study provides evidence for market overreaction and the subsequent correction. The results for up and down markets contribute to the literature on the investors' trading behavior.

scholarly journals Investor Attention, Market Dynamics, and Momentum in the Korean Stock Market

2020 ◽  
Vol 49 (4) ◽  
pp. 589-641
Author(s):  
Cheoljun Eom ◽  
Uk Chang ◽  
Byung Jin Kang ◽  
Woo Baik Lee ◽  
Jong Won Park
Keyword(s):  
Stock Market ◽  
Market Dynamics ◽  
Momentum Effect ◽  
High Turnover ◽  
Investor Attention ◽  
Momentum Profits ◽  
Korean Stock Market ◽  
Market Situation ◽  
The Impact ◽  
Loser Portfolio

This study examines the effects of investor attention on momentum in the Korean stock market. The results reveal significant negative momentum profits in stock groups with high investor attention (high turnover stocks), but insignificant results in those with low investor attention (low turnover stocks). Within high turnover stock groups, the winner portfolio has a declining price trend and insignificant performance, while the loser portfolio realizes significant positive performance through a substantial price increase in the future period. The momentum effect is highly dependent on the reversed performance of the loser portfolio. Second, the performance of the large overreaction stock group shows a more significant negative momentum effect compared to the low overreaction stock group, that is, the degree of overreaction significantly affects the momentum effect. Third, negative momentum profits are consistently observed regardless of the market dynamics. Specifically, more substantial and significant negative performance occurs in the transition market, where the market situation reverses between the past and future periods. Fourth, negative momentum profits are consistently identified even after controlling for the impact of common factors and volatility and liquidity into turnover. Our findings are qualitatively different from the characteristics of the traditional momentum effects generally reported in Western countries.

scholarly journals Daily Winners and Losers in the Korean Stock Market

2020 ◽  
Vol 49 (4) ◽  
pp. 565-588
Author(s):  
Jangkoo Kang ◽  
Jaesun Yun
Keyword(s):  
Stock Market ◽  
Idiosyncratic Volatility ◽  
Investor Attention ◽  
Foreign Investors ◽  
Working Paper ◽  
Retail Investors ◽  
Korean Stock Market ◽  
Main Driver ◽  
Volatility Puzzle ◽  
Idiosyncratic Volatility Puzzle

In their working paper, Kumar, Ruenzi, and Ungeheuer (KRU) document that stocks ranked as daily winners or losers in the previous month underperform unranked stocks during the month after the ranking. KRU explain that the ranked stocks experience a large increase in investor attention, which leads to temporary overpricing and subsequent underperformance. Following KRU, we investigate whether the same effect exists in the Korean stock market and find a robust daily winners and losers effect. First, stocks that were both daily winners and losers in a given month underperform those that were neither daily winners nor losers during the following months. Second, stocks that were never a daily winner or loser during the previous month do not exhibit the idiosyncratic volatility puzzle or the MAX effect. Moreover, the underperformance of ranked stocks is robust after controlling for the idiosyncratic volatility and the MAX effect. We suggest that the overpricing caused by excessive attention to daily winners and losers may be the main driver of the idiosyncratic volatility puzzle and the MAX effect. Lastly, we find that retail investors buy daily winners and losers, while both institutional investors and foreign investors decrease trades in the ranked stocks.

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