Individual and Institutional Informed Trading in Competing Firms Around Earnings Announcements

43 Pages Posted: 22 Jan 2016 Last revised: 1 May 2016

See all articles by Priyantha Mudalige

Priyantha Mudalige

Curtin University- School of Economics, Finance and property

Petko S. Kalev

La Trobe Business School

Kartick Gupta

University of South Australia

Huu Nhan Duong

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Multiple version iconThere are 3 versions of this paper

Date Written: January 20, 2016

Abstract

This study investigates individual and institutional trading in competing firms around earnings announcements. We find individual and institutional informed trading in competing firms, which is dominant prior to earnings announcements. Magnitude of institutional (individual) net order flow coefficient decreases (increases) with lag length, suggesting that institutional trading captures information faster than individual trading. Individual net order flow transmit information cross-stock when competitor is a small firm while institutional net order flow conveys information cross-stock irrespective of firm size. Our results are informative for regulators regarding insider trading laws and provide insights for market participants in understanding individual and institutional trading impact on cross-stock price discovery process.

Keywords: Institutional and Individual Investors; Competing and Announcing Firms; Returns; Net Order Flow; Earnings Announcements; Informed Trading

JEL Classification: G11; G12; G14

Suggested Citation

Mudalige, Priyantha and Kalev, Petko S. and Gupta, Kartick and Duong, Huu Nhan, Individual and Institutional Informed Trading in Competing Firms Around Earnings Announcements (January 20, 2016). Available at SSRN: https://ssrn.com/abstract=2719327 or http://dx.doi.org/10.2139/ssrn.2719327

Priyantha Mudalige (Contact Author)

Curtin University- School of Economics, Finance and property ( email )

Building, 408 Room 3035
Kent St.
Bentley, WA 6102
Australia
61892669977 (Phone)

Petko S. Kalev

La Trobe Business School ( email )

Department of Economics and Finance
Donald Whitehead Building: Level 3, DWB313
Bundoora, Victoria 3086
Australia
+613 9479 6285 (Phone)
+613 9479 1654 (Fax)

HOME PAGE: http://www.latrobe.edu.au/business/about/staff/profile?uname=PKalev

Kartick Gupta

University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia
+61 8 830 27179 (Phone)

HOME PAGE: http://people.unisa.edu.au/Kartick.Gupta

Huu Nhan Duong

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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