Abstract

http://ssrn.com/abstract=1782553
 
 

Citations (28)



 


 



Individual Investor Trading and Return Patterns Around Earnings Announcements


Ron Kaniel


University of Rochester - Simon Business School; CEPR

Shuming Liu


San Francisco State University

Gideon Saar


Cornell University - Samuel Curtis Johnson Graduate School of Management

Sheridan Titman


University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

February 2011

CEPR Discussion Paper No. DP8259

Abstract:     
This paper documents evidence consistent with informed trading by individual investors around earnings announcements using a unique dataset 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 the abnormal returns into a component that is attributed to risk-averse liquidity provision and a component that is attributed to private information or skill, and show that about half of the abnormal returns in the three months following the event can be attributed to private information. We also examine the behavior of individuals after the earnings announcement and find that they trade in the opposite direction to both pre-event returns (i.e., exhibit "contrarian" behavior) and the earnings surprise (i.e., exhibit "news-contrarian" behavior). The latter behavior, which could be consistent with profit-taking, has the potential to slow down the adjustment of prices to earnings news and contribute to the post-earnings announcement drift.

Number of Pages in PDF File: 55

Keywords: earnings announcement, individual investors

JEL Classification: G11, G14

working papers series


Date posted: March 14, 2011  

Suggested Citation

Kaniel, Ron and Liu, Shuming and Saar, Gideon and Titman, Sheridan, Individual Investor Trading and Return Patterns Around Earnings Announcements (February 2011). CEPR Discussion Paper No. DP8259. Available at SSRN: http://ssrn.com/abstract=1782553

Contact Information

Ron Kaniel (Contact Author)
University of Rochester - Simon Business School ( email )
Rochester, NY 14627
United States
HOME PAGE: http://rkaniel.simon.rochester.edu
CEPR ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Shuming Liu
San Francisco State University ( email )
1600 Holloway Avenue
San Francisco, CA 94132
United States
Gideon Saar
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
455 Sage Hall
Ithaca, NY 14853
United States
607-255-7484 (Phone)
607-255-5993 (Fax)
HOME PAGE: http://www.johnson.cornell.edu/faculty/profiles/Saar/
Sheridan Titman
University of Texas at Austin - Department of Finance ( email )
Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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