Are individual investors liquidity providers around earnings announcements? Evidence from an emerging market

Zhijuan Chen, William T. Lin, Changfeng Ma and Kent Wang

Accounting and Finance, 2020, vol. 60, issue 4, 3447-3475

Abstract: We first document that both buying and selling by individual investors before earnings announcements are negatively correlated with post‐event abnormal returns using a unique dataset that allows us to precisely identify individual investor trading. Next, we show that both buying and selling by individual investors before earnings announcements not only are positively associated with contemporaneous returns, but also respond positively to past returns. This is consistent with the idea that individual investors act as liquidity providers (demanders) when they sell (buy) before earnings announcements. Individual investor buying and individual investor selling after earnings announcements confirm this point.

Date: 2020
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https://doi.org/10.1111/acfi.12529

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