Informed trading, information uncertainty, and price momentum

Chen, Yifan and Zhao, Huainan (2012) Informed trading, information uncertainty, and price momentum. Journal of Banking & Finance, 36 (7). pp. 2095-2109. ISSN 1872-6372

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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
Faculty \ School:	Faculty of Social Sciences > Norwich Business School
UEA Research Groups:	Faculty of Social Sciences > Research Groups > Finance Group Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Depositing User:	Elle Green
Date Deposited:	10 Oct 2012 08:31
Last Modified:	09 Jan 2024 01:20
URI:	https://ueaeprints.uea.ac.uk/id/eprint/39826
DOI:	10.1016/j.jbankfin.2012.03.016

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