Download or read book Differential Precision of Predisclosure Information Across Traders and Trading Volume at Earnings Announcements written by Ashiq Ali and published by . This book was released on 2008 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Kim and Verrecchia (1991a) propose that volume reaction to a public announcement is proportional to the product of absolute price change at the announcement and a measure of differential precision of predisclosure information across traders. We use ownership by institutions with medium stakes (between 1 to 5 percent of outstanding shares) as a measure of differential information precision, given that these institutional investors, as compared to other institutional and individual investors, are likely to have more precise predisclosure information and are more likely to trade at earnings announcements based on their belief revision about stock value. We examine this proposition in the context of earnings announcements and obtain results consistent with the theory. Tests of the theory by prior studies have yielded somewhat inconclusive results.