IDEAS home Printed from https://ideas.repec.org/a/taf/acctbr/v31y2001i2p119-132.html
   My bibliography  Save this article

The effect of sequential information releases on trading volume and price behaviour

Author

Listed:
  • Yi-Mien Lin
  • Taychang Wang

Abstract

This paper examines a two-period setting in which each trader receives a private signal, possibly different, in each period before he trades. The principal objectives are threefold. First, we describe the risky asset demands and price reactions in a noisy rational expectations equilibrium where the time 1 average private signal is not revealed by the price sequence but the time 2 average private signal is. Secondly, we analyse how informed trading volume is affected by the revealed information and supply shocks when pure noise trading volume is uncorrected with observable market variables. Our result indicates that no trade occurs for informed traders when net supply remains fixed across rounds of trade. And, when supply shocks are random, trading volume is induced by the informed and the noise traders, but noise trading is not predictable. Finally, we investigate these properties in the case when pure noise trading volume is correlated with observable market variables. It is shown that no informed trading takes place when there is no supply shock. However, when net supply contains random shocks, trading volume consists of noise and informed trading, both of which can be estimated.

Suggested Citation

  • Yi-Mien Lin & Taychang Wang, 2001. "The effect of sequential information releases on trading volume and price behaviour," Accounting and Business Research, Taylor & Francis Journals, vol. 31(2), pages 119-132.
  • Handle: RePEc:taf:acctbr:v:31:y:2001:i:2:p:119-132
    DOI: 10.1080/00014788.2001.9729606
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00014788.2001.9729606
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/00014788.2001.9729606?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Beaver, Wh, 1968. "Information Content Of Annual Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 6, pages 67-92.
    2. Lang, Larry H P & Litzenberger, Robert H & Madrigal, Vicente, 1992. "Testing Financial Market Equilibrium under Asymmetric Information," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 317-348, April.
    3. Hellwig, Martin F., 1980. "On the aggregation of information in competitive markets," Journal of Economic Theory, Elsevier, vol. 22(3), pages 477-498, June.
    4. Holthausen, Rw & Verrecchia, Re, 1988. "The Effect Of Sequential Information Releases On The Variance Of Price Changes In An Intertemporal Multi-Asset Market," Journal of Accounting Research, Wiley Blackwell, vol. 26(1), pages 82-106.
    5. McNichols, Maureen & Trueman, Brett, 1994. "Public disclosure, private information collection, and short-term trading," Journal of Accounting and Economics, Elsevier, vol. 17(1-2), pages 69-94, January.
    6. Verrecchia, Robert E, 1982. "Information Acquisition in a Noisy Rational Expectations Economy," Econometrica, Econometric Society, vol. 50(6), pages 1415-1430, November.
    7. Kim, O & Verrecchia, Re, 1991. "Trading Volume And Price Reactions To Public Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 29(2), pages 302-321.
    8. Demski, Joel S. & Feltham, Gerald A., 1994. "Market response to financial reports," Journal of Accounting and Economics, Elsevier, vol. 17(1-2), pages 3-40, January.
    9. Bhushan, Ravi, 1989. "Collection of information about publicly traded firms : Theory and evidence," Journal of Accounting and Economics, Elsevier, vol. 11(2-3), pages 183-206, July.
    10. Wang, Jiang, 1994. "A Model of Competitive Stock Trading Volume," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 127-168, February.
    11. Admati, Anat R, 1985. "A Noisy Rational Expectations Equilibrium for Multi-asset Securities Markets," Econometrica, Econometric Society, vol. 53(3), pages 629-657, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Verrecchia, Robert E., 2001. "Essays on disclosure," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 97-180, December.
    2. Blankespoor, Elizabeth & deHaan, Ed & Marinovic, Iván, 2020. "Disclosure processing costs, investors’ information choice, and equity market outcomes: A review," Journal of Accounting and Economics, Elsevier, vol. 70(2).
    3. Frankel, Richard & Kothari, S.P. & Weber, Joseph, 2006. "Determinants of the informativeness of analyst research," Journal of Accounting and Economics, Elsevier, vol. 41(1-2), pages 29-54, April.
    4. Bagnoli, Mark & Watts, Susan G., 1998. "Information acquisition, information release and trading dynamics," Journal of Financial Markets, Elsevier, vol. 1(2), pages 221-252, August.
    5. Kothari, S.P. & Weber, Joseph & Frankel, Richard M., 2002. "Determinants of the Informativeness of Analyst Research," Working papers 4243-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    6. Masahiro Watanabe, 2002. "Price Volatility and Investor Behavior in an Overlapping Generations Model with Information Asymmetry," Yale School of Management Working Papers amz2636, Yale School of Management, revised 01 Jul 2002.
    7. Doron Israeli & Ron Kasznik & Suhas A. Sridharan, 2022. "Unexpected distractions and investor attention to corporate announcements," Review of Accounting Studies, Springer, vol. 27(2), pages 477-518, June.
    8. Harris, Milton & Raviv, Artur, 1993. "Differences of Opinion Make a Horse Race," The Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 473-506.
    9. Han, Bing & Tang, Ya & Yang, Liyan, 2016. "Public information and uninformed trading: Implications for market liquidity and price efficiency," Journal of Economic Theory, Elsevier, vol. 163(C), pages 604-643.
    10. Alford, Andrew W. & Jones, Jonathan D., 1998. "Financial reporting and information asymmetry: an empirical analysis of the SEC's information-supplying exemption for foreign companies," Journal of Corporate Finance, Elsevier, vol. 4(4), pages 373-398, December.
    11. Peress, Joel, 2010. "The tradeoff between risk sharing and information production in financial markets," Journal of Economic Theory, Elsevier, vol. 145(1), pages 124-155, January.
    12. Barth, Mary E. & Clinch, Greg & Shibano, Toshi, 1999. "International accounting harmonization and global equity markets1," Journal of Accounting and Economics, Elsevier, vol. 26(1-3), pages 201-235, January.
    13. Jean†Franã‡Ois L'Her & Jean†Marc Suret, 1996. "Consensus, dispersion et prix des titres," Contemporary Accounting Research, John Wiley & Sons, vol. 13(1), pages 229-249, March.
    14. Bailey, Warren & Mao, Connie X. & Sirodom, Kulpatra, 2007. "Investment restrictions and the cross-border flow of information: Some empirical evidence," Journal of International Money and Finance, Elsevier, vol. 26(1), pages 1-25, February.
    15. Masahiro Watanabe, 2002. "Price Volatility and Investor Behavior in an Overlapping Generations Model with Information Asymmetry," Yale School of Management Working Papers amz2636, Yale School of Management, revised 01 Jul 2002.
    16. Xue, Hao & Zheng, Ronghuo, 2021. "Word-of-mouth communication, noise-driven volatility, and public disclosure," Journal of Accounting and Economics, Elsevier, vol. 71(1).
    17. Gadi Barlevy & Pietro Veronesi, 2000. "Information Acquisition in Financial Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(1), pages 79-90.
    18. Jean†Franã‡Ois L'Her & Jean†Marc Suret, 1996. "Consensus, Dispersion and Security prices," Contemporary Accounting Research, John Wiley & Sons, vol. 13(1), pages 209-228, March.
    19. García, Diego & Urošević, Branko, 2013. "Noise and aggregation of information in large markets," Journal of Financial Markets, Elsevier, vol. 16(3), pages 526-549.
    20. Luo, Ronghua & Zhao, Senyang & Zhou, Jing, 2023. "Information network, public disclosure and asset prices," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:acctbr:v:31:y:2001:i:2:p:119-132. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RABR20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.