The first and second authors are from the Department of Accounting and Finance, University of Oulu, Finland. The third author is from the Turku School of Economics and Business Administration, Turku, Finland. They would like to thank Markku Rahiala and an anonymous referee for helpful comments and suggestions on an earlier draft of this paper. They are grateful to Mr. Henri Bergström and Mrs. Anna-Riikka Haapalehto of the Finnish Central Securities Depository (FCSD) for providing access to the data. Feedback from seminar participants from the 2003 European Accounting Association meetings, 2002 European Finance Association meetings and 2nd International Conference on Corporate Governance at the Birmingham Business School are appreciated. Financial support from the OKO Foundation is gratefully acknowledged.
How Investors Trade Around Interim Earnings Announcements
Version of Record online: 21 FEB 2006
Journal of Business Finance & Accounting
Volume 33, Issue 1-2, pages 145–178, January/March 2006
How to Cite
Vieru, M., Perttunen, J. and Schadewitz, H. (2006), How Investors Trade Around Interim Earnings Announcements. Journal of Business Finance & Accounting, 33: 145–178. doi: 10.1111/j.1468-5957.2006.01358.x
- Issue online: 21 FEB 2006
- Version of Record online: 21 FEB 2006
- (Paper received June 2002, revised version accepted March 2005.)
- investor behaviour;
- event study;
- accounting disclosure;
- trading activity
Abstract: This study focuses on non-institutional trading behaviour around interim earnings announcements in the emerging market. We separate the stock trading activity of Finnish households into five trading classes and compare the results to institutional trading. Data covering the years 1996–2000 shows that earnings news triggers trading in every trading class. We also find some evidence that actively trading individuals especially (compared to passively trading ones) show increased buying and selling activity before the event compared to the non-event period. After the event we find that Finnish households in the most active investor class tend to follow a contrarian strategy, especially selling after good news. This adds to previous evidence by Grinblatt and Keloharju (2000b). Furthermore, the performance of the active investor classes is superior to that of passive ones. Finally, the institutional trading class is clearly less affected by the announcement than the active investor classes, suggesting that institutions utilize a broader information set than individual investors.