Competition in the stock market with asymmetric information

Wang, Kun Tracy; Wang, Wanbin Walter

doi:10.1016/j.econmod.2016.11.024

Cited by 15 publications

(6 citation statements)

References 43 publications

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“…As a result, they try to mimic the insiders' trades. Numerous studies have confirmed the hypothesis and have suggested that outsiders attempt to mimic insider trades, thereby increasing trading volume (Firth et al, 2011;McMillan et al, 2014;Seyhun, 1988;Chang and Suk, 1998;Wang and Wang, 2017). However, Aktas et al (2008) and Gurgul and Majdosz (2007) do not agree with the above studies.…”

Section: Volumementioning

confidence: 87%

Effect of insider trading on stock characteristics

Nanda

Barai

2020

AJAR

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PurposeThis paper investigates if investors consider legal insider trading data while making investment decisions. If any investment decision is based on insider transactions, then it will result in abnormal stock characteristics. The purpose of this paper is to investigate if insider trading affects stock characteristics like price, return and volume. The paper further investigates the effect on stock characteristics after the trade of different types of insiders and the relationship between abnormal return and abnormal volume.Design/methodology/approachThe study uses the event study method to measure the abnormal price, return and volume. Two-stage least square regression is used to investigate the relationship between abnormal return and abnormal volume.FindingsThe insider trades affect price, return and volume. The results are identical for both buy and sell transactions. The trades of different types of insiders have diverse effects on stock characteristics. The trades of substantial shareholders give rise to the highest abnormal price and return, whereas the promoters' trades result in the highest abnormal volume. No relationship is detected between abnormal return and volume.Originality/valueA novel method to calculate the abnormal price is proposed. The effect of trading of all types of insiders on stock characteristics is analyzed. The relationship between abnormal return and abnormal volume, after an insider trade, is investigated.

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Section: Volumementioning

confidence: 87%

Effect of insider trading on stock characteristics

Nanda

Barai

2020

AJAR

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“…Compared with common investors, CAFR institutional investors hold more shares, are more financially literate and have more resources. Therefore, they have more incentives and are better able to collect and analyze corporate information (Wang & Wang, 2017;Wang & Sun, 2022). Institutional investors can monitor firms by voting during shareholder meetings (Chung, Firth, & Kim, 2002) or voting with their feet (Firth, Gao, Shen, & Zhang, 2016), thereby constraining opportunistic managerial behavior.…”

Section: 2mentioning

confidence: 99%

Does the market reward meeting or beating analyst earnings forecasts? Empirical evidence from China

Luo

Wang

2022

CAFR

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PurposeUsing a sample of 9,898 firm-year observations from 1,821 unique Chinese listed firms over the period from 2004 to 2019, this study aims to investigate whether the market rewards meeting or beating analyst earnings expectations (MBE).Design/methodology/approachThe authors use an event study methodology to capture market reactions to MBE.FindingsThe authors document a stock return premium for beating analyst forecasts by a wide margin. However, there is no stock return premium for firms that meet or just beat analyst forecasts, suggesting that the market is skeptical of earnings management by these firms. This market underreaction is more pronounced for firms with weak external monitoring. Further analysis shows that meeting or just beating analyst forecasts is indicative of superior future financial performance. The authors do not find firms using earnings management to meet or just beat analyst forecasts.Research limitations/implicationsThe authors provide evidence of market underreaction to meeting or just beating analyst forecasts, with the market's over-skepticism of earnings management being a plausible mechanism for this phenomenon.Practical implicationsThe findings of this study are informative to researchers, market participants and regulators concerned about the impact of analysts and earnings management and interested in detecting and constraining managers' earnings management.Originality/valueThe authors provide new insights into how the market reacts to MBE by showing that the market appears to focus on using meeting or just beating analyst forecasts as an indicator of earnings management, while it does not detect managed MBE. Meeting or just beating analyst forecasts is commonly used as a proxy for earnings management in the literature. However, the findings suggest that it is a noisy proxy for earnings management.

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“…The main emphasis lies in demonstrating the impact of endogenous or exogenous information on market efficiency (Fama 1970, Boya 2013 and the consequences of the informational asymmetry between market participants (Kyle 1985, Wang & Wang 2017. The market responses to new information are usually investigated in the context of stock splits (Arbel & Swanson 1993, Kalay & Kronlund 2013, dividends (Kaestner & Liu 1998, Dasilas & Leventis 2011 or earning announcements (Basu et al 2013).…”

Section: Literature Reviewmentioning

confidence: 99%

Market Commentaries and Stock Prices in Poland: A Text Mining Approach

Oleksy

Czupryna

2018

KREM

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From a theoretical point of view, the scope and quality of available information determines the market efficiency and, thus, investors' decisions. However, an excessive amount of information leads to information overload. In the case of textual data, advanced analytical methods must be applied to identify some regularities and trends within the analysed text corpora. Text mining may be useful in supporting the decision-making process. The paper examines the interdependencies between market commentaries and stock prices. More specifically, it verifies the linguistic characteristics of opinions distributed by institutional investors (investment fund company) and their intertemporal links to the price movements on the Warsaw Stock Exchange. The results indicate that: 1) there is no significant linguistic difference between market commentaries written after weeks of relatively low and relatively high rates of returns on the Warsaw Stock Exchange; 2) the linguistic content of selected market commentaries does not have a predictive value for the Polish stock market; 3) commentaries with

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Competition in the stock market with asymmetric information

Cited by 15 publications

References 43 publications

Effect of insider trading on stock characteristics

Effect of insider trading on stock characteristics

Does the market reward meeting or beating analyst earnings forecasts? Empirical evidence from China

Market Commentaries and Stock Prices in Poland: A Text Mining Approach

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