How Investors Trade Around Interim Earnings Announcements

34 Pages Posted: 15 Apr 2006

See all articles by Markku J. Vieru

Markku J. Vieru

University of Lapland - Faculty of Social Sciences, Multidimensional Tourism Institute

Jukka Perttunen

University of Oulu - Department of Accounting & Finance

Hannu J. Schadewitz

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

Abstract

This study focuses on non-institutional trading behaviour 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 institutional trading. Data covering the years 1996-2000 shows that earnings news triggers trading in every trading class. We also find some evidence that actively trading individuals especially (compared to passively trading ones) show increased buying and selling activity before the event compared to the non-event period. After the event we find that Finnish households in the most active investor class tend to follow a contrarian strategy, especially selling after good news. This adds to previous evidence by Grinblatt and Keloharju (2000b). Furthermore, the performance of the active investor classes is superior to that of passive ones. Finally, the institutional trading class is clearly less affected by the announcement than the active investor classes, suggesting that institutions utilize a broader information set than individual investors.

JEL Classification: M41, G12, G15, G22, G23

Suggested Citation

Vieru, Markku and Perttunen, Jukka and Schadewitz, Hannu J., How Investors Trade Around Interim Earnings Announcements. Journal of Business Finance & Accounting, Vol. 33, No. 1-2, pp. 145-178, January/March 2006, Available at SSRN: https://ssrn.com/abstract=886399 or http://dx.doi.org/10.1111/j.1468-5957.2006.01358.x

Markku Vieru (Contact Author)

University of Lapland - Faculty of Social Sciences, Multidimensional Tourism Institute ( email )

P.O. Box 122
Rovaniemi FIN-96101
Finland
+358 400 377641 (Phone)
+358 16 341 2600 (Fax)

Jukka Perttunen

University of Oulu - Department of Accounting & Finance ( email )

P.O. Box 4600
Oulu FIN-90014
Finland

Hannu J. Schadewitz

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/people/hannu-schadewitz

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