TY - JOUR
T1 - Strategic Trading at the Preopening after Earnings Announcements
AU - Levi, Shai
AU - Zhang, Xiao-Jun
PY - 2020
Y1 - 2020
N2 - 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.
AB - 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.
U2 - 10.2308/jfr-2018-0020
DO - 10.2308/jfr-2018-0020
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SN - 2380-2154
VL - 5
SP - 65
EP - 80
JO - Journal of Financial Reporting
JF - Journal of Financial Reporting
IS - 1
ER -