TITLE

An Empirical Analysis of the Effects of Online Trading on Stock Price and Trading Volume Reactions to Earnings Announcements

AUTHOR(S)
AHMED, ANWER S.; SCHNEIBLE JR., RICHARD A.; STEVENS, DOUGLAS E.
PUB. DATE
September 2003
SOURCE
Contemporary Accounting Research;Fall2003, Vol. 20 Issue 3, p413
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This study provides evidence regarding the effects of online trading on stock price and trading volume reactions to quarterly earnings announcements. We test for differences in stock price and volume reactions to quarterly earnings announcements between a period with a significant amount of online trading (1996-99) and a period without online trading (1992-95). We conjecture that online trading has increased the proportion of naive investors in the market. We predict that this will result in (1) a decrease in the average precision of investor information prior to earnings announcements leading to higher earnings response coefficients (ERCs), (2) an increase in differential interpretation of earnings leading to higher trading volume reactions that are unrelated to price change, and (3) a decrease in differential prior precision leading to a decrease in the association between trading volume and absolute price change. We find evidence consistent with all three predictions. Our findings are relevant for assessing the validity of concerns about online trading expressed by regulators and the validity of theoretical models of trade with asymmetrically informed investors.
ACCESSION #
10901507

 

Related Articles

  • SECURITY PRICE CHANGES AND TRANSACTION VOLUMES: SOME ADDITIONAL EVIDENCE. Epps, Thomas W. // Journal of Financial & Quantitative Analysis;Mar1977, Vol. 12 Issue 1, p141 

    The article presents additional empirical evidence in support of previous research by the author asserting a securities market model based on transaction volume and price change ratios. Questions raised by the initial study concerning its application to common stock prices are reviewed and a...

  • Earnings Announcements, Analyst Forecasts, and Trading Volume. MINSUP SONG // Seoul Journal of Business;Dec2013, Vol. 19 Issue 2, p1 

    Empirical evidence shows that a significant proportion of analysts issue their forecasts at the time of an earnings announcement (Ivković and Jegadeesh 2004). These forecasts are commonly regarded as analyst interpretations of earnings news contained in the announcement (Schipper 1991)....

  • STOCK MARKET OVERREACTION AND TRADING VOLUME: EVIDENCE FROM MALAYSIA. Ali, Ruhani; Ahmad, Zamri; Anusakumar, Shangkari V. // Asian Academy of Management Journal of Accounting & Finance;2011, Vol. 7 Issue 2, p103 

    We investigate the stock market overreaction in Bursa Malaysia from January 2000 to October 2010 using weekly data. We find that winner portfolios tend to have negative returns whereas loser portfolios have positive returns for various holding periods from 1 to 52 weeks. Loser stocks experience...

  • Asymmetric stock price and liquidity responses to changes in the FTSE SmallCap index. Biktimirov, Ernest; Li, Boya // Review of Quantitative Finance & Accounting;Jan2014, Vol. 42 Issue 1, p95 

    We examine market reactions to changes in the FTSE SmallCap index membership, which are determined quarterly based on market capitalization and are free of information effects. Our main results are asymmetric price and liquidity responses between the firms that are shifted between FTSE indexes...

  • SHORT-TERM STOCK PRICE REACTION TO SHOCKS: EVIDENCE FROM AMMAN STOCK EXCHANGE. Alrabadi, Dima Waleed Hanna // Interdisciplinary Journal of Contemporary Research in Business;May2012, Vol. 4 Issue 1, p770 

    This study examine the short term price reaction to shocks for all the stocks traded in Amman Stock Exchange (ASE) using daily data over the period 2002-2010. The abnormal return is calculated as the difference between the daily return and an average return over a window of 50 days ending 10...

  • Ä°MKB 30 endeksi ile VOB-Ä°MKB 30 endeks vadeli iÅŸlem sözleÅŸmeleri arasındaki öncül-ardıl iliÅŸkisi. Ersoy, Ersan; Ali Bayrakdaroğlu // Istanbul University Journal of the School of Business Administra;2013, Vol. 42 Issue 1, p26 

    The aim of this study is to investigate whether there is a lead-lag relationship between spot and futures markets using daily closing prices belonging to the Istanbul Stock Exchange 30 (ISE 30) Index and Turkish Derivatives Exchange (TurkDEX)-ISE 30 index future contracts. For the analysis,...

  • Studying Long Memory of Tehran Stock Exchange. Nikoomaram, Hashem; Anbarestani, Marjan // Indian Journal of Science & Technology;Aug2012, Vol. 5 Issue 8, p3218 

    According to the efficient market hypothesis, prices in stock market follow the random walk theory. In such a market, data is published rapidly and affect the stock price. Thus a large proportion of financial theory is extended based on random walk models for assets prices and returns. Long...

  • National Market System (NMS) (US).  // International Dictionary of Finance, 4th Edition;2003, p186 

    Information on the term National Market System (NMS) (US) is presented. It refers to a system providing information on the quoted price of stocks, the latest price paid, the high and low for the day and the current volume. NMS brokers are required to report this information through the system...

  • BEHAVIOR OF STOCK PRICE VARIABILITY OVER TRADING AND NONTRADING PERIODS, AND DAILY RETURN VOLATILITY. Sumiyana // Gadjah Mada International Journal of Business;Sep-Dec2007, Vol. 9 Issue 3, p409 

    This study examined the behavior of stock price variability over trading and nontrading periods, and daily return volatility. This study used intraday data in Indonesia Stock Exchange. Sample was taken from the firms listed in LQ 45 indexes for the year of 1999-2006. The behavior of stock price...

Share

Read the Article

Courtesy of THE LIBRARY OF VIRGINIA

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics