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Information demand and net selling around earnings announcement

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  • Chu, Gang
  • Li, Xiao
  • Zhang, Yongjie

Abstract

Previous literature has shown the effectiveness of information dissemination channels on reducing information asymmetry from the supply-side. This paper mainly focuses on investigating the effects of information diffusion from the demand-side, i.e., investors’ voluntary demand for firm-specific information proxied by Baidu Search Volume Index. By taking the earnings announcement as an example for information asymmetry, we observe a net-selling behavior for investors during the pre-announcement periods that are closely related to changes of returns around the earnings announcements. More importantly, our empirical tests prove that the increased investors’ information demands help to alleviate the net-selling phenomenon as well as its further effects on earnings announcements returns that are resulted from the high information asymmetry during pre-announcement periods. In that sense, we conclude that investors’ information demand contributes to reducing information asymmetry by incorporating information into stock prices.

Suggested Citation

  • Chu, Gang & Li, Xiao & Zhang, Yongjie, 2022. "Information demand and net selling around earnings announcement," Research in International Business and Finance, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:riibaf:v:59:y:2022:i:c:s0275531921001434
    DOI: 10.1016/j.ribaf.2021.101522
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    2. Wang, Yaqi & Wang, Chunfeng & Sensoy, Ahmet & Yao, Shouyu & Cheng, Feiyang, 2022. "Can investors’ informed trading predict cryptocurrency returns? Evidence from machine learning," Research in International Business and Finance, Elsevier, vol. 62(C).

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    More about this item

    Keywords

    Information demand; Net selling; Earnings announcement; Firm-specific information; Baidu index;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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