Econometric Modeling: Capital Markets - Asset Pricing eJournal  ·  2014  ·  Impact 5

ABSTRACT
This paper combines daily buy and sell institutional trading volume with all news announcements from Reuters. Using institutional order flow (buy volume minus sell volume) we find a variety of evidence that institutions are informed. Institutional trading volume predicts the occurrence of news announcements. Institutional order flow predicts (i) the sentiment of the news; (ii) the stock market reaction on news announcement days; (iii) the stock market reaction on crisis news days; and (iv) earnings announcement surprises. These results suggest that significant price discovery related to news stories occurs through institutional trading prior to the news announcement date.

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impact factor5
year_of_publication2014
sourceEconometric Modeling: Capital Markets - Asset Pricing eJournal

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