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Bridge over ocean
1 November 1996 Financial Analysts Journal Volume 52, Issue 6

Private Information and the Costs of Trading around Quarterly Earnings Announcements

  1. Michael J. Barclay
  2. Craig G. Dunbar

No one wants to trade with those who have better information. In markets where traders have asymmetric information, however, both informed and uninformed traders must make strategic trading decisions. Because public announcements can affect the information asymmetry between traders, these strategic decisions are likely to be most important around public announcements. How concerned should uninformed traders be about the potential information asymmetry when trading around public announcements? Surprisingly, whether for large-block trades or for the entire order flow, there is no evidence that the uninformed can trade on more favorable terms by varying the timing of their trades in relation to a quarterly earnings announcement.

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