Institutional Investor Trading Around Earnings Announcements in China
Posted: 17 Jan 2012
Date Written: January 17, 2012
This study examines the institutional investors’ trading strategies to exploit the post-earnings announcement drift (PEAD) around earnings announcements in China. China’s fund management industry is developing rapidly. Our findings suggest the possibility that institutional investors trade on private information about earnings surprises. Moreover, a bad information environment restricts institutional investors’ ability to exploit PEAD strategies. Further evidence indicates that institutional investors’ trading activities accelerate the speed at which stock prices incorporate earnings information. This study can help the international investment community develop a better understanding of the role of institutional investors in China’s equity market.
Keywords: post-earnings announcement drift, institutional investors, market efficiency, China
JEL Classification: G12, G14, M41
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