How Investors Trade Around Interim Earnings Announcements

56 Pages Posted: 10 Mar 2007

See all articles by Hannu J. Schadewitz

Hannu J. Schadewitz

Turku School of Economics at the University of Turku - Department of Accounting & Finance

Date Written: January 2002

Abstract

This study focuses on non-institutional trading behavior around interim earnings announcements in the emerging market. We separate the stock trading activity of Finnish households into five trading classes and compare the results to corresponding institutional trading. Data covering the years 1996-2000 shows that earnings news triggers trading in every trading classes. Before the event, especially active individuals show increased buying and selling activity compared to the non-event period. This finding supports Kim and Verrecchia's (1991a, b) proposition that announcement stimulates private information-gathering and trading. After the event we find that Finnish households in the most active investor class tend to follow a contrarian strategy, especially selling after the good news. This adds to previous evidence by Grinblatt and Keloharju (2000b). Further, individuals with active trading, perform better than the passive investors around the announcement. Finally, the impact of the announcement on institutional trading is clearly milder compared to that on the active investor classes.

JEL Classification: D82, G14, M41

Suggested Citation

Schadewitz, Hannu J., How Investors Trade Around Interim Earnings Announcements (January 2002). EFA 2002 Berlin, Forthcoming. Available at SSRN: https://ssrn.com/abstract=302739 or http://dx.doi.org/10.2139/ssrn.302739

Hannu J. Schadewitz (Contact Author)

Turku School of Economics at the University of Turku - Department of Accounting & Finance ( email )

Rehtorinpellonkatu 3
FIN-20500 Turku
Finland
+358 2 333 9321 (Phone)
+358 2 333 9350 (Fax)

HOME PAGE: http://www.utu.fi/en/units/tse/units/accounting_and_finance/contact/Pages/Hannu-Schadewitz.aspx

Register to save articles to
your library

Register

Paper statistics

Downloads
428
Abstract Views
2,946
rank
67,060
PlumX Metrics