Information Asymmetry, Investment Horizons, and the Dual Role of Public Announcements

Information Asymmetry, Investment Horizons, and the Dual Role of Public Announcements This paper investigates inter-temporal relations in market liquidity and price efficiency in a setting that is more descriptive of trading patterns around public announcements than those typically analyzed in the existing literature. The model incorporates both strategic investors who behave as short-term, profit-taking traders, and traders who invest in the security over a long-term horizon. It is shown that an anticipated increase in market liquidity in the announcement period will lead short-term investors to trade more aggressively in the pre-announcement period. This results in improved price efficiency and, in some cases, increased market liquidity in the pre-announcement period. However, a higher propensity to behave as a profit-taker in the announcement period leads to less efficient prices in the pre-announcement period. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Information Asymmetry, Investment Horizons, and the Dual Role of Public Announcements

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2000 by Kluwer Academic Publishers
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1023/A:1009600707097
Publisher site
See Article on Publisher Site

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