Are individual investors liquidity providers around earnings announcements? Evidence from an emerging market. (22nd August 2019)

• Record Type: Journal Article
• Authors: Chen, Zhijuan; Lin, William T.; Ma, Changfeng; Wang, Kent
• Is Part Of: Accounting and finance. Volume 60:Number 4(2020)
• Page Start: 3447
• Page End: 3475
• Publication Date: 2019-08-22
• Subjects: Individual investor -- Earnings announcements -- Liquidity; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12529
• Languages: English
• ISSNs: 0810-5391

Abstract

Abstract: We first document that both buying and selling by individual investors before earnings announcements are negatively correlated with post‐event abnormal returns using a unique dataset that allows us to precisely identify individual investor trading. Next, we show that both buying and selling by individual investors before earnings announcements not only are positively associated with contemporaneous returns, but also respond positively to past returns. This is consistent with the idea that individual investors act as liquidity providers (demanders) when they sell (buy) before earnings announcements. Individual investor buying and individual investor selling after earnings announcements confirm this point.