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Who trades in competing firms around earnings announcements

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  • Mudalige, Priyantha
  • Duong, Huu Nhan
  • Kalev, Petko S.
  • Gupta, Kartick

Abstract

This study investigates individual and institutional trading activities around earnings announcements. We find evidence of individual and institutional informed trading in competing firms before earnings announcements. We also observe that institutional trading exhibits quicker incorporation of new information, which suggests that institutional investors are more likely to use private information in trading in competing firms. The individual net order flow transmits information cross-stock when a competitor is a small firm, while institutional net order flow conveys information cross-stock irrespective of firm size. Finally, we find that institutional trading in competing firms exhibits cross-stock price impact before earnings announcements.

Suggested Citation

  • Mudalige, Priyantha & Duong, Huu Nhan & Kalev, Petko S. & Gupta, Kartick, 2020. "Who trades in competing firms around earnings announcements," Pacific-Basin Finance Journal, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:pacfin:v:59:y:2020:i:c:s0927538x1830581x
    DOI: 10.1016/j.pacfin.2019.101219
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    3. Sharon Teitler‐Regev & Tchai Tavor, 2023. "The effect of Airbnb announcements on hotel stock prices," Australian Economic Papers, Wiley Blackwell, vol. 62(1), pages 78-100, March.

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    More about this item

    Keywords

    Earning announcements; Institutional and individual investors; Competing firms; Informed trading; Cross-stock price impact;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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