Filing Speed, Information Leakage, and Price Formation
49 Pages Posted: 1 May 2019 Last revised: 3 Sep 2021
Date Written: August 10, 2021
This study investigates the price discovery process in equity markets with informed institutional investors. Consistent with extant theories, we show empirically that institutional investors, in contrast to retail investors, trade based on the leaked sign of unanticipated news and then (partially) reverse their trades when the news become public. We also find that the longer the leakage period for institutional investors to exploit, the less informative is the news when it becomes public. These results are robust to controls for firm press releases and news articles and endogeneity concerns.
Keywords: Filing Lag, Institutional Trading, 8-K Reports, Private Information
JEL Classification: M41, M48
Suggested Citation: Suggested Citation