The News Impact Around the Earnings Announcement with the Incorporation of Investor Types

Abstract

This study investigates whether the news release prior to the earnings announcement would influence different investors’ trading behavior during the earnings announcement periods. We bridge the gaps between this study and the previous analyses that the technology of text mining is applied to extract the Chinese news, the proxies of the news information are constructed and the comprehensive tick data is used to categorize trader types including dealers, mutual funds, foreigners, individuals and corporations. The empirical results show that individuals may have significant reactions to the news report prior to the earnings announcement. However the news report may have less effect to institutions’ trading behavior. The findings confirm that institutions are more rational than individuals.