Individual Investor Trading and Return Patterns around Earnings Announcements

  • Author(s): RON KANIEL, SHUMING LIU, GIDEON SAAR, SHERIDAN TITMAN
  • Published: Mar 27, 2012
  • Pages: 639-680
  • DOI: 10.1111/j.1540-6261.2012.01727.x

ABSTRACT

This paper provides evidence of informed trading by individual investors around earnings announcements using a unique data set of NYSE stocks. We show that intense aggregate individual investor buying (selling) predicts large positive (negative) abnormal returns on and after earnings announcement dates. We decompose abnormal returns following the event into information and liquidity provision components, and show that about half of the returns can be attributed to private information. We also find that individuals trade in both return‐contrarian and news‐contrarian manners after earnings announcements. The latter behavior has the potential to slow the adjustment of prices to earnings news.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version