Trading Volume, Heterogeneous Expectations and Earnings Announcements

34 Pages Posted: 3 Sep 2009

See all articles by Thanh Huong Dinh

Thanh Huong Dinh

affiliation not provided to SSRN

Jean-Francois Gajewski

University Savoie Mont-Blanc, IREGE

Date Written: September 2, 2009


Our objective was to conduct an experimental study of investors’ reactions in terms of trading volume to the announcement of annual earnings. Shareholders consider annual net income as the most important figure in the announced results since it is the basis for determining profit for individual accounts at the shareholders’ general meeting. In our experiment, annual earnings are announced at the end of eight rounds of exchanges. Prior to the year end announcement, a fraction of the annual income is revealed to all of the participants at the end of every two periods. Participants thus periodically revise their expectations regarding annual results. The experiment shows that the heterogeneity of expectations does not decrease when investors have more information about the final results. This heterogeneity also is the main factor behind transactions in our experimental asset markets. However, too large a dispersion in expectations prevents investors from trading. Although price changes in absolute value influence trading volume as expected, the heterogeneity of expectations has a greater impact.

Keywords: trading volume, heterogeneity of expectations, earnings announcement, and experimental asset markets

JEL Classification: C91, D84

Suggested Citation

Dinh, Thanh Huong and Gajewski, Jean-Francois, Trading Volume, Heterogeneous Expectations and Earnings Announcements (September 2, 2009). 22nd Australasian Finance and Banking Conference 2009, Available at SSRN: or

Thanh Huong Dinh

affiliation not provided to SSRN ( email )

Jean-Francois Gajewski (Contact Author)

University Savoie Mont-Blanc, IREGE ( email )

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Annecy-le-Vieux, 74944
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