TY - JOUR
T1 - Asymmetric decrease in liquidity trading before earnings announcements and the announcement return premium
AU - Levi, Shai
AU - Zhang, Xiao Jun
N1 - Publisher Copyright:
© 2015 Elsevier B.V.
PY - 2015/11
Y1 - 2015/11
N2 - Investors are reluctant to trade in the high-information-asymmetry days before earnings announcements. We show that the decrease in liquidity trading before announcements is asymmetric. We analyze buy and sell orders of investors with passive investment strategies, and find they do not reduce their sales as much as their purchases in the days before announcements. Investors needing liquidity sell stocks at a discount relative to the post-announcement price, and these preannouncement liquidity sales are a significant driver of the average positive returns, or return premium, known to characterize announcement days.
AB - Investors are reluctant to trade in the high-information-asymmetry days before earnings announcements. We show that the decrease in liquidity trading before announcements is asymmetric. We analyze buy and sell orders of investors with passive investment strategies, and find they do not reduce their sales as much as their purchases in the days before announcements. Investors needing liquidity sell stocks at a discount relative to the post-announcement price, and these preannouncement liquidity sales are a significant driver of the average positive returns, or return premium, known to characterize announcement days.
KW - Earnings announcement premium
KW - Liquidity
UR - http://www.scopus.com/inward/record.url?scp=84946478692&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2015.08.003
DO - 10.1016/j.jfineco.2015.08.003
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AN - SCOPUS:84946478692
SN - 0304-405X
VL - 118
SP - 383
EP - 398
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 2
M1 - 2570
ER -