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Informed local trading prior to earnings announcements

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  • Berry, Thomas
  • Gamble, Keith Jacks
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    Abstract

    Do individual investors have better information about local stocks? Our results demonstrate that they do. Large trading imbalances by investors living close to a firm's headquarters predict the stock's earnings announcement return. Stocks with the most net buying by local investors average significantly higher market-adjusted announcement returns than stocks with the most net selling by local investors. This return difference is pronounced for small and medium-sized firms, but absent among large firms, which have significant analyst coverage. Local investors' information advantage comes at the expense of nonlocal traders.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Markets.

    Volume (Year): 16 (2013)
    Issue (Month): 3 ()
    Pages: 505-525

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    Handle: RePEc:eee:finmar:v:16:y:2013:i:3:p:505-525

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    Web page: http://www.elsevier.com/locate/finmar

    Related research

    Keywords: Trading; Location; Information; Earnings; Local; Individual investors;

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    References

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