Institutional Trading around Corporate News: Evidence from Textual Analysis
65 Pages Posted: 5 Oct 2013 Last revised: 5 Dec 2019
Date Written: December 3, 2019
We examine institutional trading surrounding corporate news by combining a comprehensive database of newswire releases on U.S. firms with a high-frequency database of institutional trades. To identify the ability of institutions to predict or quickly interpret news, we form “news clusters” of related news about a particular firm that occurs in rapid succession. We find that institutions chiefly trade on the tone of news directly after the earliest news release in a cluster, and such news-motivated trading predicts returns over the following weeks. Our results suggest that institutional investors contribute to price efficiency by the speedy interpretation of public information.
Keywords: Institutional trading, Public news, Textual analysis
JEL Classification: G11, G12, G14, G23, G39
Suggested Citation: Suggested Citation