Earnings Announcements and Market Depth

Posted: 7 Jul 1998

See all articles by Robert M. Bushman

Robert M. Bushman

University of North Carolina Kenan-Flagler Business School

Sunil Dutta

University of California, Berkeley - Haas School of Business

John S. Hughes

University of California at Los Angeles

Raffi Indjejikian

University of Michigan at Ann Arbor - Accounting

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Abstract

This paper presents a model of strategic behavior by a privately informed trader and liquidity traders near to the anticipated release of public signals such as earnings announcements. The private information of the informed trader is long-lived in the sense that the public signal does not completely eliminate the informed trader's informational advantage. In keeping with recent empirical findings, conditions are identified under which market depth may be higher or lower after earnings announcements than before. Previous studies predicting lower depth following the release of public signals assume that private information is short-lived, and rely on the arrival of new private information at that time. This distinction in the longevity of private information is important since earnings announcements are unlikely to fully reveal private information acquired beforehand.

Note: This abstract was never entered as a working paper. Gail L. Pratt 7/7/98

JEL Classification: G14

Suggested Citation

Bushman, Robert M. and Dutta, Sunil and Hughes, John S. and Indjejikian, Raffi J., Earnings Announcements and Market Depth. Available at SSRN: https://ssrn.com/abstract=105288

Robert M. Bushman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-9809 (Phone)

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/bushmanr/

Sunil Dutta

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-643-1229 (Phone)
510-643-1412 (Fax)

John S. Hughes (Contact Author)

University of California at Los Angeles ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-794-9553 (Phone)
310-267-2193 (Fax)

Raffi J. Indjejikian

University of Michigan at Ann Arbor - Accounting ( email )

701 Tappan Street
Ann Arbor, MI 48109-1234
United States

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