Trading volume and information asymmetry surrounding scheduled and unscheduled announcements : a thesis submitted in partial fulfillment of the requirements for the degree of Master of Finance, Massey University, Februrary 2009
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2009
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Massey University
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Abstract
This thesis investigates abnormal trading volume around scheduled and unscheduled announcements.
The research is an extension of Chae (2005), Journal of Finance, Vol
60, which tests corporate announcements in the US stock market. In this thesis, Australian
stocks are used to establish whether market characteristics affect trading behaviour
around announcements. In addition, I extend the traditional methodology to overcome
possible shortcomings in the previous studies. This thesis also discusses how information
asymmetry affects the abnormal trading volume on the announcement day.
In contrast to earlier studies, I nd abnormal trading volume does not change before
either scheduled or unscheduled announcements, but, as expected, increases on and after
the scheduled and unscheduled announcements. Information asymmetry increases trading
volumes when unscheduled announcements are made, but has no effect for scheduled
announcements.
I show that the failure to adjust for the correlation between corporate events, results in
abnormal trading volumes being detected prior to announcements. Differences between
the Australian and US results can not all be explained by methodological differences.
It appears that the underlying dynamics of the Australian market are different; casting
doubts on the ability to generalize market characteristics from US based studies on abnormal
trading volumes.
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Effect of announcements on trading volume, Australian stock market