Strategic Trading at the Preopening after Earnings Announcements

36 Pages Posted: 13 Oct 2016 Last revised: 17 Sep 2018

See all articles by Shai Levi

Shai Levi

Tel Aviv University

Xiao-Jun Zhang

University of California, Berkeley - Accounting Group; China Academy of Financial Research (CAFR)

Date Written: September 7, 2018

Abstract

Prior literature finds the price adjustment after earnings announcements is not immediate. This paper shows that informed investors act strategically to prevent their information from immediately affecting prices after announcements. Specifically, we examine the price discovery at the preopening auction after earning announcements. We show that traders place more orders at the end of the preopening after earnings announcements, a behavior that reduces the market’s ability to learn their information, and we find they make profits on these late orders.

Keywords: earnings announcements, price discovery, preopening, informed trading

JEL Classification: G14, M41

Suggested Citation

Levi, Shai and Zhang, Xiao-Jun, Strategic Trading at the Preopening after Earnings Announcements (September 7, 2018). Available at SSRN: https://ssrn.com/abstract=2851555 or http://dx.doi.org/10.2139/ssrn.2851555

Shai Levi (Contact Author)

Tel Aviv University ( email )

Tel Aviv, 69978
Israel

Xiao-Jun Zhang

University of California, Berkeley - Accounting Group ( email )

545 Student Services Building
SPC 1900
Berkeley, CA 94720
United States
(510) 642-4789 (Phone)
(510) 642-4700 (Fax)

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

Register to save articles to
your library

Register

Paper statistics

Downloads
125
Abstract Views
702
rank
224,585
PlumX Metrics