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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Official URL: http://dx.doi.org/10.1016/j.jbankfin.2012.03.016
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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.
|Research Areas:||A. Middlesex University Schools and Centres > School of Science and Technology > Design Engineering and Mathematics|
A. Middlesex University Schools and Centres > Business School > Economics
|Citations on ISI Web of Science:||0|
|Deposited On:||24 May 2012 08:21|
|Last Modified:||13 May 2014 15:47|
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