› › Are Changes In Public And Private Information Precision Related To Changes In Market Liquidity Around Earnings Announcements

Are Changes in Public and Private Information Precision Related to Changes in Market Liquidity Around Earnings Announcements?

Author : Kiridaran (Giri) Kanagaretnam

Publisher :

Page : 40 pages

File Size : 12,80 MB

Release : 2006

Category :

ISBN :

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Book Description

We investigate the relations between changes in the precisions of public and private information and changes in market liquidity around earnings announcements. Increases in the precision of public information reduce information asymmetry, whereas increases in the precision of private information increase information asymmetry. Copeland and Galai (1983), Glosten and Milgrom (1985) and Kyle (1985) demonstrate that market liquidity decreases with increases in information asymmetry. Consequently, we hypothesize that changes in public information precision are positively related to changes in market liquidity and changes in private information precision are negatively related to changes in market liquidity. We employ percentage spreads and quoted depths to measure market liquidity and the measures proposed by Barron, Kim, Lim and Stevens (1998) to measure public and private information precision. Consistent with our hypotheses, we find that changes in the bid-ask spread are negatively related to changes in the precision of public information and positively related to changes in private information precision. Also consistent with our hypothesis, we find that changes in depth are negatively related to changes in the precision of private information. However, we do not find support for our hypothesis that changes in depth are positively related to changes in public information precision.





Exchange-Rate Dynamics

Author : Martin D. D. Evans

Publisher : Princeton University Press

Page : 561 pages

File Size : 19,49 MB

Release : 2011-03-14

Category : Business & Economics

ISBN : 1400838843

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Book Description

A comprehensive and in-depth look at exchange-rate dynamics Variations in the foreign exchange market influence all aspects of the world economy, and understanding these dynamics is one of the great challenges of international economics. This book provides a new, comprehensive, and in-depth examination of the standard theories and latest research in exchange-rate economics. Covering a vast swath of theoretical and empirical work, the book explores established theories of exchange-rate determination using macroeconomic fundamentals, and presents unique microbased approaches that combine the insights of microstructure models with the macroeconomic forces driving currency trading. Macroeconomic models have long assumed that agents—households, firms, financial institutions, and central banks—all have the same information about the structure of the economy and therefore hold the same expectations and uncertainties regarding foreign currency returns. Microbased models, however, look at how heterogeneous information influences the trading decisions of agents and becomes embedded in exchange rates. Replicating key features of actual currency markets, these microbased models generate a rich array of empirical predictions concerning trading patterns and exchange-rate dynamics that are strongly supported by data. The models also show how changing macroeconomic conditions exert an influence on short-term exchange-rate dynamics via their impact on currency trading. Designed for graduate courses in international macroeconomics, international finance, and finance, and as a go-to reference for researchers in international economics, Exchange-Rate Dynamics guides readers through a range of literature on exchange-rate determination, offering fresh insights for further reading and research. Comprehensive and in-depth examination of the latest research in exchange-rate economics Outlines theoretical and empirical research across the spectrum of modeling approaches Presents new results on the importance of currency trading in exchange-rate determination Provides new perspectives on long-standing puzzles in exchange-rate economics End-of-chapter questions cement key ideas



The Changing Nature of Trading Volume Reactions to Earnings Announcements

Author : Richard A. Schneible Jr.

Publisher :

Page : 43 pages

File Size : 29,40 MB

Release : 2008

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ISBN :

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Book Description

We document a change in the nature of trading volume reactions to quarterly earnings announcements over the time period 1976-2005. Consistent with Landsman and Maydew (2002), we find that the magnitude of abnormal trading volume around quarterly earnings announcements has increased over time and that this increase is greater for large firms than small firms. We show, however, that this trend has reversed the negative relation between firm size and trading volume documented by Bamber (1987). Applying insights from recent trading volume theory, we predict and provide evidence that the increase in abnormal trading volume across time and firm size is due to increases in pre-announcement private information. Specifically, we show that the component of abnormal trading volume associated with price change, which theory suggests reflects pre-announcement private information, is increasing across time and firm size. Our results suggest that investors are motivated to acquire private information prior to earnings announcements about firms that have relatively high quality information environments. Thus, our results have implications for policies aimed at reducing information asymmetry between investors by increasing public disclosure.



Stock Market Liquidity and Information Asymmetry Around Voluntary Earnings Announcements

Author : Faten Lakhal

Publisher :

Page : 31 pages

File Size : 39,81 MB

Release : 2005

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ISBN :

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Book Description

This paper studies market liquidity and stock prices components of information asymmetry around non-mandated earnings announcements by focusing on effective bid-ask spreads and trading volumes. Using event study methodology for 309 voluntary earnings announcements from 1998 to 2001, we found that voluntary earnings disclosures exhibit significant stock market reactions around news releases. We also noticed a significant decrease in effective spreads and an increase in trading volumes when good and bad news are released. Moreover, investors react more aggressively to bad news announcements suggesting that these news are more credible. Panel-data regression analyses were also used to examine both categories of voluntary earnings announcements: earning forecasts and quarterly earning announcements separately. They show that quarterly announcements enhance market liquidity by reducing bid-ask spreads and increasing trading volumes in the announcement window. However, earnings forecasts exacerbate information asymmetry before and after the announcement date. This result suggests that earning forecasts are subject to earning manipulation and less credible, then for the market.



How Does the Information Environment Affect Information Asymmetry Around Earnings Announcements?

Author :

Publisher :

Page : 57 pages

File Size : 20,14 MB

Release : 2014

Category :

ISBN :

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Book Description

This paper shows that the information environment is an important determinant of private information acquisition and changes in information asymmetry around earnings announcements. I create a sample of earnings announcements from 39 countries and investigate whether firm and country-level variation in the information environment affects private information acquisition. To do this, I examine the level of information asymmetry before and during earnings announcements. A stronger firm-level information environment is (1) negatively related to changes in pre-event information asymmetry and (2) positively related to changes in event period information asymmetry. Similarly, a stronger country-level information environment is associated with the firm-level information environment having a stronger effect on information asymmetry before the announcement and a weaker effect during the announcement.





Earnings Quality

Author : Jennifer Francis

Publisher : Now Publishers Inc

Page : 97 pages

File Size : 45,23 MB

Release : 2008

Category : Business & Economics

ISBN : 1601981147

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Book Description

This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.



Powering the Digital Economy: Opportunities and Risks of Artificial Intelligence in Finance

Author : El Bachir Boukherouaa

Publisher : International Monetary Fund

Page : 35 pages

File Size : 50,85 MB

Release : 2021-10-22

Category : Business & Economics

ISBN : 1589063953

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Book Description

This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.



Financial Soundness Indicators

Author : International Monetary Fund

Publisher : International Monetary Fund

Page : 302 pages

File Size : 24,56 MB

Release : 2006-04-04

Category : Business & Economics

ISBN : 1589063856

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Book Description

Financial Soundness Indicators (FSIs) are measures that indicate the current financial health and soundness of a country's financial institutions, and their corporate and household counterparts. FSIs include both aggregated individual institution data and indicators that are representative of the markets in which the financial institutions operate. FSIs are calculated and disseminated for the purpose of supporting macroprudential analysis--the assessment and surveillance of the strengths and vulnerabilities of financial systems--with a view to strengthening financial stability and limiting the likelihood of financial crises. Financial Soundness Indicators: Compilation Guide is intended to give guidance on the concepts, sources, and compilation and dissemination techniques underlying FSIs; to encourage the use and cross-country comparison of these data; and, thereby, to support national and international surveillance of financial systems.