Earnings Surprise, Portfolio Inertia and Stock Price Volatility

Huang Shunwu (), Chang Wang () and Zheng Lan ()
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Huang Shunwu: School of Economics, Hefei University of Technology, Hefei230601, China
Chang Wang: School of Economics, Hefei University of Technology, Hefei230601, China
Zheng Lan: School of Economics, Hefei University of Technology, Hefei230601, China

Journal of Systems Science and Information, 2015, vol. 3, issue 4, 301-320

Abstract: From the perspective of the mediation effect, this paper investigates whether institutional investors adjust their portfolios according to the listed companies earnings surprise. We find that the portfolio adjustments by institutional investors exert the mediation effect on the relationship between earnings surprise and stock price volatility. Institutional investors actively manage their portfolios in the rising market, which induces the stock price volatility; while they less adjust their portfolio in the falling market, the volatility declines. This paper helps understand the role of institutional investors in the fluctuation of stock prices, and provides a new basis for decision making of regulatory administration.

Keywords: institutional investor; earnings surprise; mediating effect; portfolio inertia; stock price volatility (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:3:y:2015:i:4:p:301-320:n:2

DOI: 10.1515/JSSI-2015-0301

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