Strategic Trading at the Preopening after Earnings Announcements

Shai Levi, Xiao-Jun Zhang

Research output: Contribution to journalArticlepeer-review

Abstract

Prior literature finds the price adjustment after earnings announcements is not immediate. This paper provides evidence that informed investors act strategically to prevent their information from immediately affecting prices after earnings announcements. Specifically, we examine the price discovery at the preopening auction after earnings announcements. We show that traders place more orders at the end of the preopening after earnings announcements, a behavior that reduces the market's ability to learn their information, and we find they profit from these late orders.
Original languageEnglish
Pages (from-to)65-80
Number of pages16
JournalJournal of Financial Reporting
Volume5
Issue number1
DOIs
StatePublished - 2020

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