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Earnings Announcements: Good News for Institutional Investors and Short Sellers
Author(s) -
Berkman Henk,
McKenzie Michael D.
Publication year - 2012
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2011.00322.x
Subject(s) - earnings , institutional investor , business , monetary economics , post earnings announcement drift , earnings response coefficient , accounting , economics , finance , corporate governance
In this paper, we consider the trading behavior of institutional investors and short sellers around earnings announcements. The results suggest that institutional investors, and to a lesser extent short sellers, successfully anticipate earnings news. In the period immediately after the earnings announcement, both types of traders are active in the market and trade in response to the earnings announcement. In particular, short sellers are quick to increase their short positions when a company releases bad news. Institutional traders also trade in response to the news; however, they take longer to react.