scholarly journals Information leakage and informed trading around unscheduled earnings announcements

2008 ◽  
Vol 6 (2) ◽  
pp. 143-163 ◽  
Author(s):  
Campbell Heggen ◽  
Gerard Gannon
Keyword(s):  
Stock Returns ◽  
Information Content ◽  
Firm Growth ◽  
Earnings Announcements ◽  
Abnormal Returns ◽  
Information Leakage ◽  
Informed Trading ◽  
International Standards ◽  
Trading Behavior ◽  
Trading Volumes

While there has been much judicial discussion regarding the competency of Australia’s continuous disclosure regime with reference to contemporaneous international standards, there has to date been limited empirical analysis of the Australian system’s effectiveness in preventing selective disclosure and information leakage. This paper presents an empirical study of information content and trading behavior around unscheduled earnings announcements – comprising of profit upgrades, profit warnings and neutral trading statements – made by ASX-listed companies during 2004. The contention is that informed trading impacts on the stock returns and trading volumes of listed entities, and hence abnormal returns or trading volumes observed prior to an announcement provide evidence of information leakage. The paper models a range of factors that potentially influence firm disclosure practices and contribute to the level information asymmetry in the market during the pre-announcement period. Previous research has investigated the influence of firm size and information content in contributing to information leakage. This study further considers the variables of firm growth, capital structure and industry group

Information Content of Insider Trades before and after the Sarbanes-Oxley Act

2010 ◽  
Vol 85 (2) ◽  
pp. 419-446 ◽  
Author(s):  
Francois Brochet
Keyword(s):  
Stock Returns ◽  
Information Content ◽  
Abnormal Returns ◽  
Litigation Risk ◽  
Sarbanes Oxley ◽  
Insider Trades ◽  
Negative News ◽  
Before And After ◽  
Trading Volumes ◽  
Public Disclosures

ABSTRACT: This study examines the information content of Form 4 filings under the more timely disclosure regime introduced by Section 403 of the Sarbanes-Oxley Act of 2002 (SOX). Abnormal returns and trading volumes around filings of insider stock purchases are significantly greater after SOX than before. Abnormal trading volumes around filings of insider sales are also greater post-SOX, on average, but stock returns are not more negative. However, once controlling for pre-planned transactions, reporting lag, litigation risk, and news following insider trades, I find a negative association between returns around filings of insider sales and SOX. Overall, the evidence suggests that the prompt public disclosures about insider transactions mandated by the new rule are relevant to the pricing of securities. The results are also consistent with SOX and regulatory actions reducing the incentives to sell ahead of privately known negative news.

A new look at the meeting clustering effect

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ángel Pardo ◽  
Eddie Santandreu
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Relevant Information ◽  
Investor Attention ◽  
Content Type ◽  
Potential Link ◽  
Clustering Effect ◽  
Trading Volumes ◽  
The Relationship

PurposeThe study aims to test the existence of a meeting clustering effect in the Spanish Stock Exchange (SSE).Design/methodology/approachThis paper studies the relationship between the clustering of annual general meetings and stock returns in the SSE. A multivariate analysis is carried out in order to analyse the relationship between monthly returns and the clustering of general meetings in the SSE.FindingsThe authors show that meeting clustering exists and that some months exhibit significant and positive additional returns related to the holding of ordinary or extraordinary general meetings.Research limitations/implicationsThe authors have explored some possible explanations for the meeting clustering effect, such as a potential link with the “Halloween” effect or the presence of higher-than-normal levels of volatility, trading volumes or investor attention. However, none of these can explain the meeting clustering effect that emerges as a new anomaly in the SSE.Practical implicationsThe authors have documented significant and positive abnormal returns in some months that coincide with the holding of general meetings. Therefore, the holding of ordinary and/or extraordinary meetings in some months involves the release of relevant information for investors.Originality/valueThis study complements the financial literature because it is focused on the clustering of meetings and its effect on a stock market whose legal order is based on civil law. This fact allows us to shed new light on meeting clustering and its effect on other types of markets.

More than just Noise? Examining the Information Content of Stock Microblogs on Financial Markets

2018 ◽  
Vol 33 (1) ◽  
pp. 50-69 ◽  
Author(s):  
Ting Li ◽  
Jan van Dalen ◽  
Pieter Jan van Rees
Keyword(s):  
Financial Markets ◽  
Stock Returns ◽  
Information Content ◽  
Computational Linguistics ◽  
Trading Volume ◽  
Abnormal Returns ◽  
Feature Reduction ◽  
Individual Investors ◽  
Market Sentiment ◽  
Aggregation Of Information

Scholars and practitioners alike increasingly recognize the importance of stock microblogs as they capture the market discussion and have predictive value for financial markets. This paper examines the extent to which stock microblog messages are related to financial market indicators and the mechanism leading to efficient aggregation of information. In particular, this paper investigates the information content of stock microblogs with respect to individual stocks and explores the effects of social influences on an interday and intraday basis. We collected more than 1.2 million stock-related messages (i.e., tweets) related to S&P 100 companies over a period of 7 months. Using methods from computational linguistics, we went through an elaborate process of message feature reduction, spam detection, language detection, and slang removal, which has led to an increase in classification accuracy for sentiment analysis. We analyzed the data on both a daily and a 15-min basis and found that the sentiment of messages is positively affected with contemporaneous daily abnormal stock returns and that message volume predicts 15-min follow-up returns, trading volume, and volatility. Disagreement in microblog messages positively influences stock features, both in interday and intraday analysis. Notably, if we give a greater share of voice to microblog messages depending on the social influence of microbloggers, this amplifies the relationship between bullishness and abnormal returns, market volume, and volatility. Following knowledgeable investors advice results in more power in explaining changes in market features. This offers an explanation for the efficient aggregation of information on microblogging platforms. Furthermore, we simulated a set of trading strategies using microblog features and the results suggest that it is possible to exploit market inefficiencies even when transaction costs are included. To our knowledge, this is the first study to comprehensively examine the association between the information content of stock microblogs and intraday stock market features. The insights from the study permit scholars and professionals to reliably identify stock microblog features, which may serve as valuable proxies for market sentiment and permit individual investors to make better investment decisions.

Bank Stock Returns And Quarterly Earnings: Price Responses To Imminent Earnings Announcements

2011 ◽  
Vol 11 (2) ◽  
pp. 135 ◽  
Author(s):  
Thomas F. Gosnell ◽  
Andrea J. Heuson ◽  
Robert E. Lamy
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Earnings Announcements ◽  
Abnormal Returns ◽  
Quarterly Earnings ◽  
Price Reaction ◽  
Earnings Information ◽  
Bank Stock Returns ◽  
Stock Price Reaction ◽  
Bank Stock

Numerous studies have documented that most of the stock price reaction to earnings announcements have occurred by the time the earnings information is made public. This study considers stock price reaction during the time period between the end of the accounting calendar when the forthcoming earnings information is ostensibly available to top management and the earnings release date to measure anticipatory price responses to imminent quarterly earnings announcements. Using bank stocks, the results indicate that portfolios composed of banks that eventually announce improved earnings show significant positive abnormal returns soon after the close of the accounting quarter while portfolios composed of banks that eventually publicize poor profit performance exhibit significant negative abnormal returns.

Insider Trading Around Stock Split Announcements

2011 ◽  
Vol 16 (3) ◽  
Author(s):  
Yulong Ma ◽  
Huey-Lian Sun ◽  
Jasmine Yur-Austin
Keyword(s):  
Information Content ◽  
Insider Trading ◽  
Abnormal Returns ◽  
Portfolio Diversification ◽  
Stock Splits ◽  
Trading Behavior ◽  
Corporate Insiders ◽  
Stock Split ◽  
Empirical Analyses

This research examines the trading behavior and motives of corporate insiders around announcements of firms' stock splits. Our empirical analyses document significant increases in insider sales prior to the announcement. Further, pre-announcement insider sales are found to be positively related to pre-announcement-period abnormal returns. These findings suggest that insider trading before stock split announcements is motivated mainly by portfolio diversification needs rather than by the information content of the announcements.

scholarly journals How Main Street Drives Wall Street: Customer (Dis)satisfaction, Short Sellers, and Abnormal Returns

2020 ◽  
Vol 57 (6) ◽  
pp. 1055-1075
Author(s):  
Ashwin Malshe ◽  
Anatoli Colicev ◽  
Vikas Mittal
Keyword(s):  
Customer Satisfaction ◽  
Stock Returns ◽  
Abnormal Returns ◽  
Capital Intensity ◽  
Trading Behavior ◽  
Short Sellers ◽  
Unit Increase ◽  
Abnormal Stock Returns ◽  
Customer Dissatisfaction ◽  
The Impact

Although previous studies have established a direct link between customer-based metrics and stock returns, research is unclear on the mediated nature of their association. The authors examine the association of customer satisfaction and abnormal stock returns, as mediated by the trading behavior of short sellers. Using quarterly data from 273 firms over 2007–2017, the authors find that short interest—a measure of short seller activity—mediates the impact of customer satisfaction and dissatisfaction on abnormal stock returns. Customer dissatisfaction has a more pronounced effect on short selling compared with customer satisfaction. In addition, customer satisfaction and dissatisfaction are more relevant for firms with low capital intensity and firms that face lower competitive intensity. The results show that a one-unit increase in customer satisfaction is associated with a .56 percentage point increase in abnormal returns, while a one-unit increase in customer dissatisfaction is associated with a 1.34 percentage point decrease in abnormal returns.

Investor Sophistication and Patterns in Stock Returns after Earnings Announcements

2000 ◽  
Vol 75 (1) ◽  
pp. 43-63 ◽  
Author(s):  
Eli Bartov ◽  
Suresh Radhakrishnan ◽  
Itzhak Krinsky
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Trading Volume ◽  
Explanatory Variable ◽  
Earnings Announcements ◽  
Abnormal Returns ◽  
Institutional Ownership ◽  
Quarterly Earnings ◽  
Institutional Holdings ◽  
Investor Sophistication

This study tests whether the observed patterns in stock returns after quarterly earnings announcements are related to the proportion of firm shares held by institutional investors, a variable used by prior research to proxy for investor sophistication. Our findings show that the institutional holdings variable is negatively correlated with the observed post-announcement abnormal returns. Our findings also show that traditional proxies for transaction costs (i.e., trading volume, stock price) as well as firm size have little incremental power to explain post-announcement abnormal returns when institutional holdings is an explanatory variable. If institutional ownership is a valid proxy for investor sophistication, these findings suggest that the trading activity of unsophisticated investors underlies the predictability of stock returns after earnings announcements. However, tests evaluating the validity of institutional holdings as a proxy for investor sophistication yield only mixed results. This calls for caution in interpreting our findings.

scholarly journals Do Chinese M&A activities create shareholder value in the short run? Evidence from Chinese-German cross-border takeovers

2020 ◽  
Vol 2 (2) ◽  
pp. 33-46
Author(s):  
Jing Wang ◽  
Michel Charifzadeh ◽  
Tim Alexander Herberger
Keyword(s):  
Stock Returns ◽  
Event Study ◽  
Shareholder Value ◽  
Abnormal Returns ◽  
Information Leakage ◽  
Market Model ◽  
Cross Border ◽  
Acquiring Firms ◽  
Short Run ◽  
Value Effect

Our paper investigates the response of acquiring firms’ stock returns around the announcement date in cross-border mergers and acquisitions (M&A) between listed Chinese acquirers and German targets. We apply an event study methodology to examine the shareholder value effect based on a sample of M&A deals over the most recent period of 2012-2018. We apply a market model event study based on the argumentation of Brown and Warner (1985) and use short-term observation periods according to Andrade, Mitchell, and Stafford (2001) as well as Hackbarth and Morellec (2008). The results indicate that the announcement of M&A involving German targets results in a positive cumulative abnormal return of on average 2.18% for Chinese acquirers’ shareholders in a five-day symmetric event window. Furthermore, we found slight indications of possible information leakage prior to the formal announcement. Although it shows that the size of acquiring firms is not necessarily correlated with the positive abnormal returns in the short run, this study suggests that Chinese acquirers’ shareholders gain higher abnormal returns when the German targets are non-listed companies.

The Information Content of Idiosyncratic Volatility

2009 ◽  
Vol 44 (1) ◽  
pp. 1-28 ◽  
Author(s):  
George J. Jiang ◽  
Danielle Xu ◽  
Tong Yao
Keyword(s):  
Stock Returns ◽  
Information Content ◽  
Firm Growth ◽  
Predictive Power ◽  
Idiosyncratic Volatility ◽  
Market Anomalies ◽  
Future Earnings ◽  
Future Earning ◽  
Accounting Accruals ◽  
Selective Disclosure

AbstractAng, Hodrick, Xing, and Zhang (2006a) show that stocks with high idiosyncratic return volatility tend to have low future returns. This paper further documents that idiosyncratic volatility is inversely related to future earning shocks, and more importantly, that the return-predictive power of idiosyncratic volatility is induced by its information content about future earnings. We examine various explanations of the triangular relation among idiosyncratic volatility, future earning shocks, and future stock returns. Our results show that the idiosyncratic volatility anomaly is not a simple manifestation of previously documented market anomalies related to excessive extrapolation on firm growth, over-investment tendency, accounting accruals, or investor underreaction to earnings news. On the other hand, there is evidence that the idiosyncratic volatility anomaly is related to corporate selective disclosure, and the anomaly is stronger among stocks with a less sophisticated investor base.

Sign in / Sign up

Export Citation Format

Share Document