Odd Lot Trading and Earnings Announcements

28 Pages Posted: 16 Jan 2016 Last revised: 14 Dec 2016

See all articles by Hardy Johnson

Hardy Johnson

Kansas State University

Ansley Chua

Kansas State University

Tianming Zhang

Florida State University - Department of Accounting

Date Written: December 14, 2016

Abstract

This study investigates odd lot trading, both odd lot trades and odd lot orders, around quarterly earnings announcements to determine whether or not odd lot traders are informed regarding the information contained in earnings announcements. We find that pre-announcement odd lot order imbalances are not positively correlated with post-announcement returns and that odd lot traders do not successfully trade around earnings announcements to earn positive market adjusted returns. Portfolios long stocks highly bought by odd lot traders in the pre-announcement period and short stocks highly-sold by odd lot traders do not outperform the market. Our results are robust when controlling for non-event negative correlations between odd lot order imbalances and returns, and controlling for earnings management practices. We conclude that odd lot traders are not in possession of earnings announcement information prior to its release to the public.

Keywords: Odd Lot Orders, Earnings Announcements, Informed Trading, Order Imbalance

JEL Classification: G10, G14

Suggested Citation

Johnson, Hardy and Chua, Ansley and Zhang, Tianming (Tim), Odd Lot Trading and Earnings Announcements (December 14, 2016). Available at SSRN: https://ssrn.com/abstract=2715820 or http://dx.doi.org/10.2139/ssrn.2715820

Hardy Johnson (Contact Author)

Kansas State University ( email )

Manhattan, KS 66506-4001
United States

Ansley Chua

Kansas State University ( email )

Manhattan, KS 66506-4001
United States

Tianming (Tim) Zhang

Florida State University - Department of Accounting ( email )

Rovetta Business Bldg. (RBA)
College of Business
Tallahassee, FL 32306-1110
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
51
Abstract Views
597
rank
391,150
PlumX Metrics