Informed local trading prior to earnings announcements

Thomas Berry and Keith Jacks Gamble

Journal of Financial Markets, 2013, vol. 16, issue 3, 505-525

Abstract: Do individual investors have better information about local stocks? Our results demonstrate that they do. Large trading imbalances by investors living close to a firm's headquarters predict the stock's earnings announcement return. Stocks with the most net buying by local investors average significantly higher market-adjusted announcement returns than stocks with the most net selling by local investors. This return difference is pronounced for small and medium-sized firms, but absent among large firms, which have significant analyst coverage. Local investors' information advantage comes at the expense of nonlocal traders.

Keywords: Trading; Location; Information; Earnings; Local; Individual investors (search for similar items in EconPapers)
JEL-codes: G10 G11 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:16:y:2013:i:3:p:505-525

DOI: 10.1016/j.finmar.2012.07.001

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