Informed trading and price discovery before corporate events

• 成果类型: Article
• 署名作者: Baruch, Shmuel; Panayides, Marios; Venkataraman, Kumar
• 署名单位: Utah System of Higher Education; University of Utah; Pennsylvania Commonwealth System of Higher Education (PCSHE); University of Pittsburgh; Southern Methodist University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2017.05.008
• 发表日期: 2017
• 页码: 561-588
• 关键词: Informed trader; Insider trading; Limit order; Short selling; Buy-sell asymmetry

摘要

Stock prices incorporate less news before negative events than positive events. Further, informed agents use less price aggressive (limit) orders before negative events and more price aggressive (market) orders before positive events (buy-sell asymmetry). Motivated by these patterns, we model the execution risk that informed agents impose on each other and relate the asymmetry to costly short selling. When investor base is narrow, security borrowing is difficult, or the magnitude of the event is small, buy-sell asymmetry is pronounced and price discovery before negative events is lower. Overall, we show that the strategies of informed traders influence the process of price formation in financial markets, as predicted by theory. (c) 2017 Elsevier B.V. All rights reserved.