Informed Trading and Price Discovery before Corporate Events

@inproceedings{Baruch2013InformedTA,
  title={Informed Trading and Price Discovery before Corporate Events},
  author={Shmuel Baruch and Marios A. Panayides and Kumar Venkataraman},
  year={2013}
}
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… CONTINUE READING
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Informed trader; insider trading; limit order; short selling; buy-sell asymmetry

Amber Anand, Leonce Bargeron, Kerry Back, Indraneel Chakraborty
  • This Draft: June 2016 JEL classifications:
  • 2016