Algorithmic Trading and Post-Earnings-Announcement Drift: A Cross-Country Study

IF 2 Q2 BUSINESS, FINANCE International Journal of Accounting Pub Date : 2023-01-20 DOI:10.1142/s1094406023500038

Tao Chen

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Abstract

Synopsis The research problem This study investigates whether algorithmic trading matters to post-earnings-announcement drift (PEAD) across 41 countries. Motivation The increasing importance of algorithms has sparked interest in how computer-triggered trades affect the formation of securities prices. Thus, a large body of research has emerged to probe the instantaneous impact of algorithmic trading on price discovery; however, little work explores the role of algorithms in efficient pricing of low-frequency financial statements. In addition, the literature on PEAD always highlights firm-level drivers of this phenomenon, whereas its country-level institutional determinants remain silent. The test hypotheses H1: Earnings-announcement algorithmic trading does not impact PEAD. H2: Country-level investor protection does not impact the association between earnings-announcement algorithmic trading and PEAD. H3: Country-level information dissemination does not impact the association between earnings-announcement algorithmic trading and PEAD. H4: Country-level disclosure requirements do not impact the association between earnings-announcement algorithmic trading and PEAD. Target population Various stakeholders include market traders, firm managers, regulators, and scholars. Adopted methodology Ordinary Least Square (OLS) Regressions. Analyses We follow Saglam [( 2020 ) Financial Management, 49, 33–67] to measure algorithmic trading using the transaction-level data. Based on a global sample covering 41 markets, we estimate the regression of PEAD on four proxies for algorithmic trading after considering firm-specific controls and fixed effects of country and year. Findings We find a negative and significant association between earnings-announcement algorithmic activity and PEAD. The documented relation retains despite addressing the endogeneity problem. Further analyses indicate that algorithmic participation mitigates investor disagreement, alleviates trader distraction, and reduces market friction, thus facilitating efficient pricing of earnings information. Finally, the impact of algorithmic trading on PEAD is more prominent in countries with stronger investor protection, faster information dissemination, and stricter disclosure requirements.

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算法交易与盈利公告后漂移：跨国研究

本研究调查了41个国家的算法交易是否对收益公告后漂移(PEAD)有影响。算法的重要性日益提高，引发了人们对计算机触发的交易如何影响证券价格形成的兴趣。因此，已经出现了大量的研究来探索算法交易对价格发现的即时影响;然而，很少有研究探讨算法在低频财务报表有效定价中的作用。此外，关于PEAD的文献总是强调这一现象的公司层面驱动因素，而其国家层面的制度决定因素则保持沉默。检验假设H1:盈余公告算法交易不影响PEAD。H2:国家层面的投资者保护不影响盈余公告算法交易与PEAD之间的关联。H3:国家层面的信息传播不影响盈余公告算法交易与PEAD之间的关联。H4:国家层面的披露要求不影响盈余公告算法交易与PEAD之间的关联。不同的利益相关者包括市场交易者、公司经理、监管者和学者。采用普通最小二乘(OLS)回归方法。我们遵循Saglam [(2020) Financial Management, 49, 33-67]使用交易级数据来衡量算法交易。基于覆盖41个市场的全球样本，在考虑公司特定控制和国家和年份的固定影响后，我们估计了PEAD在算法交易的四个代理上的回归。我们发现盈余公告算法活动与PEAD之间存在显著负相关。尽管解决了内生性问题，但记录的关系仍然存在。进一步的分析表明，算法参与缓解了投资者的分歧，减轻了交易者的分心，减少了市场摩擦，从而促进了收益信息的有效定价。最后，算法交易对PEAD的影响在投资者保护力度更强、信息传播速度更快、披露要求更严格的国家更为突出。

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来源期刊

International Journal of Accounting BUSINESS, FINANCE-

CiteScore

1.20

自引率

0.00%

发文量

期刊介绍： The aim of The International Journal of Accounting is to advance the academic and professional understanding of accounting theory, policies and practice from the international perspective and viewpoint. The Journal editorial recognizes that international accounting is influenced by a variety of forces, e.g., governmental, political and economic. Thus, the primary criterion for manuscript evaluation is the incremental contribution to international accounting literature and the forces that impact the field. The Journal aims at understanding the present and potential ability of accounting to aid in analyzing and interpreting international economic transactions and the economic consequences of such reporting. These transactions may be within a profit or non-profit environment. The Journal encourages a broad view of the origins and development of accounting with an emphasis on its functions in an increasingly interdependent global economy. The Journal also welcomes manuscripts that help explain current international accounting practices, with related theoretical justifications, and identify criticisms of current policies and practice. Other than occasional commissioned papers or special issues, all the manuscripts published in the Journal are selected by the editors after the normal double-blind refereeing process.