Abstract
This study consists introductory survey and three essays where
investors' trading responses to interim earnings announcements
are studied using Finnish data. The essays are individual papers, but
their topics are closely connected since they address the trading
response from different angles. The essays progress from an aggregated
to a more detailed examination. The first essay was conducted on
daily data, whereas the second and third consist of intraday trading
data. In all three essays information asymmetry is assumed to affect
trading behavior around interim earnings announcements.
The first article contains empirical findings regarding the
effect of interim earnings announcements on investors' trading
policy using Finnish data. The aim of the paper is to investigate empirically
the role of pre-disclosure information asymmetry and the information
content in explaining volume responses to interim earnings announcements.
Evidence is provided that the trading volume response is positively
associated with the information content and to some extent with the
level of pre-disclosure information asymmetry. The results are in
line with the theoretical trading volume proposition. However,
the significance levels are lower than in similar US studies and
the association between positive and negative news is slightly asymmetric.
The second article finds evidence from the Helsinki Stock
Exchange that the widely documented U-shape pattern in trading activity
- namely heavy trading in the beginning and at the end of the trading
day and relatively light trading in the middle of the day - is affected
by an anticipated information event (i.e. interim earnings announcement).
Before the announcement day, trading is more concentrated at the
close. This is consistent with investors' heterogeneous
willingness to bear expected overnight risk, which is especially
prevalent before an announcement. Moreover, a slight increase on
the open is evident after the announcement day. Evidence is also
provided that the change in intraday trading behavior is associated
with announcement-related factors, such as the range of analysts' earnings
forecasts, the magnitude of unexpected earnings and firm size. Furthermore,
this association is evident to some extent during the transition
between trading and non-trading regimes.
The third study examines whether the permanent price effects
of individual trades are greater before or after an interim earnings
announcement on the Helsinki Stock Exchange. If the permanent price
effects are greater before the announcement this would suggest that
investors believe that some traders are better informed before the
interim earnings announcement than after. Using permanent price
effects as a measure of price adjustment for private information,
tests were performed to see whether price adjustments are greater
in pre-announcement periods than in post-announcement periods. The
results, based on interim earnings releases for the period 1993
to 1997 by HSE-listed firms, suggest that large trades do indeed
produce greater permanent price effects before an announcement than
after it. This suggests that large trades associated with price
changes (especially uptick trades) before an announcement send a
stronger signal to other investors than similar trades after the
announcement. For small trades the results were insignificant.
| Identifer | oai:union.ndltd.org:oulo.fi/oai:oulu.fi:isbn951-42-5719-7 |
| Date | 13 July 2000 |
| Creators | Vieru, M. (Markku) |
| Publisher | University of Oulu |
| Source Sets | University of Oulu |
| Language | English |
| Detected Language | English |
| Type | info:eu-repo/semantics/doctoralThesis, info:eu-repo/semantics/publishedVersion |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess, © University of Oulu, 2000 |
| Relation | info:eu-repo/semantics/altIdentifier/pissn/1455-2647, info:eu-repo/semantics/altIdentifier/eissn/1796-2269 |
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