Daily closing inside spreads and trading volumes around earnings announcements

Daniella Acker, Mathew Stalker and Ian Tonks

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper examines the determinants of inside spreads and their behaviour around corporate earning announcement dates, for a sample of UK firms over the period 1986-94. The paper finds that closing daily inside spreads are affected by order processing costs (proxied by trading volumes), inventory control costs (trading volumes and return variability) and asymmetric information (unusually high trading volumes). Inside spreads start to narrow 15 days before an earnings announcement, and narrow further by the end of the announcement day. We also identify a puzzling phenomenon. There is only a ‘sluggish’ recovery of spreads after the announcement: inside spreads continue to remain at relatively narrow levels, and take up to 90 days to recover to their pre-announcement width.

Keywords: Earnings announcements; Spreads (search for similar items in EconPapers)
JEL-codes: G1 M4 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2002-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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http://eprints.lse.ac.uk/24908/ Open access version. (application/pdf)

Related works:
Journal Article: Daily Closing Inside Spreads and Trading Volumes Around Earnings Announcements (2002)
Working Paper: Daily Closing Inside Spreads and Trading Volumes around Earnings Announcements (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24908

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