Are Trade Size-Based Inferences About Traders Reliable? Evidence from Institutional Earnings-Related Trading

• 成果类型: Article
• 署名作者: Cready, William; Kumas, Abdullah; Subasi, Musa
• 署名单位: University of Texas System; University of Texas Dallas; University of Richmond; University of Missouri System; University of Missouri Columbia
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12056
• 发表日期: 2014
• 页码: 877-909
• 关键词: investors; returns; disclosure

摘要

The use of observed transaction sizes to differentiate between small and large investor trading patterns is widespread. A significant concern in such studies is spurious effects attributable to misclassification of transactions, particularly those originating from large investors. Such effects can arise unintentionally, strategically, or endogenously. We examine comprehensive records of a sample of institutional investors (i.e., large traders), including their order sizes and overall position changes, to assess the degree to which such misclassifications give rise to spurious inferences about small and large investor trading activities. Our analysis shows that these institutions are heavily involved in small transaction activity. It also shows that they increase their order sizes substantially in announcement periods relative to nonannouncement periods, presumably as an endogenous response to earnings news. In the immediate earnings announcement period, transaction size-based inferences about directional trading are quite misleading-producing spurious small trader effects and, more surprisingly, erroneous inferences about large trader activity.