Informed trading, information uncertainty, and price momentum

Chen, Yifan (2012) Informed trading, information uncertainty, and price momentum. Journal of Banking & Finance, 36 (7). pp. 2095-2109. ISSN 0378-4266

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Abstract

In this paper we investigate the effects of informed trading (PIN) and information uncertainty in determining
price momentum. We find that trading strategies based on buying high-uncertainty good-news stocks and shorting high-uncertainty bad-news stocks work well when limited to high-PIN stocks, while stocks with low-PIN do not exhibit price continuations, even when the uncertainty level of those stocks is high. In contrast, momentum returns are always significant for high-PIN stocks, irrespective of information uncertainty. Overall, we show that the informed trading effect is both independent of and stronger than that of information uncertainty in determining price momentum.

Item Type: Article
Additional Information: Print edition is July 2012.
Research Areas: A. > Business School > Economics
A. > School of Science and Technology > Design Engineering and Mathematics
ISI Impact: 0
Item ID: 9128
Depositing User: Aran Lewis
Date Deposited: 24 May 2012 08:21
Last Modified: 13 Oct 2016 14:24
URI: http://eprints.mdx.ac.uk/id/eprint/9128

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