Prior literature finds the price adjustment after earnings announcements is not immediate. This paper provides evidence that informed investors act strategically to prevent their information from immediately affecting prices after earnings announcements. Specifically, we examine the price discovery at the preopening auction after earnings announcements. We show that traders place more orders at the end of the preopening after earnings announcements, a behavior that reduces the market's ability to learn their information, and we find they profit from these late orders.

JEL Classifications: M41; G14.

Data Availability: Data are available from the public sources cited in the text.

Keywords:
earnings announcements, preopening, informed trading, price discovery, price impact, liquidity
2020
You do not currently have access to this content.