Are institutions informed about news?

Terrence Hendershott, Dmitry Livdan and Norman Schürhoff
Authors registered in the RePEc Author Service: Norman Schuerhoff

Journal of Financial Economics, 2015, vol. 117, issue 2, 249-287

Abstract: This paper combines daily buy and sell institutional trading volume with all news announcements from Reuters. Using institutional order flow (buy volume minus sell volume) we find a variety of evidence that institutions are informed. Institutional trading volume predicts the occurrence of news announcements. Institutional order flow predicts (i) the sentiment of the news; (ii) the stock market reaction on news announcement days; (iii) the stock market reaction on crisis news days; and (iv) earnings announcement surprises. These results suggest that significant price discovery related to news stories occurs through institutional trading prior to the news announcement date.

Keywords: Institutions; Trading; Stock returns; News sentiment (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G24 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (116)

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Related works:
Working Paper: Are Institutions Informed About News? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:117:y:2015:i:2:p:249-287

DOI: 10.1016/j.jfineco.2015.03.007

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