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|Title: ||Evidence of Informed Trading Prior to Earnings Announcements|
|Authors: ||Affleck-Graves, John|
Jennings, Robert H.
Mendenhall, Richard R.
|Issue Date: ||Jan-1995 |
|Series/Report no.: ||FIN-94-001|
|Abstract: ||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
|Appears in Collections:||Finance Working Papers|
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