Institutional Trading around Corporate News: Evidence from Textual Analysis
نویسندگان
چکیده
In this paper, we examine institutional trading surrounding corporate news by combining a comprehensive database of news releases for all US firms during 2000 to 2010 with a high-frequency database of institutional trades. We find that institutions trade on the news tone only on the news release day. This news-trading pattern is more pronounced for news related to firm fundamentals, and with a less ambiguous content. News-driven institutional trades result in abnormal returns during the following four weeks. Our results suggest that the trading advantage of institutional investors stems from their ability to process information in a very timely manner. Huang is with the University of Waterloo, email: [email protected]; Tan is with the University of Waterloo, email: [email protected]; and Wermers is with the University of Maryland, email: [email protected]. The authors gratefully acknowledge helpful comments from Luarent Barras, Andrew Chin, Tong Yu, and seminar and conference participants at AllianceBernstein, McMaster University, University of Rhode Island, Wilfrid Laurier University, the 2013 Northern Finance Association annual meeting, and the Paris International Finance Conference 2013. We gratefully acknowledge financial support from the Social Sciences and Humanities Research Council of Canada. All errors are ours.
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