The Dynamics of Information Production and Diffusion: Evidence from Buy-Side Participation in Earnings Conference Calls

43 Pages Posted: 6 Mar 2018 Last revised: 21 Jun 2018

See all articles by Ling Cen

Ling Cen

The Chinese University of Hong Kong

Vanitha Ragunathan

University of Queensland - Business School; Financial Research Network (FIRN)

Yan Xiong

The Hong Kong University of Science and Technology

Liyan Yang

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: February 26, 2018

Abstract

We study information production and diffusion resulting from dynamic interactions between different types of informed investors in financial markets. Using a theoretical framework that exploits the setting of the Q&A section of earnings conference calls, we predict that information production from buy-side participation is more likely to trigger high price jumps and abnormal trading volume, as well as a subsequent price drift, relative to sell-side participation. Using high-frequency trading data during earnings conference calls we find evidence consistent with our prediction. The impact of buy-side participation on asset prices and trading activities is particularly strong when buy-side participants are affiliated with hedge funds. Our theoretical and empirical analyses shed light on how information complementarities affect financial market outcomes and provide an explanation to the "Einhorn Effect" that intrigues practitioners and policy makers.

Keywords: Information Production, Information Diffusion, Information Complementarity, Earnings Conference Calls

JEL Classification: G14, G30, M41

Suggested Citation

Cen, Ling and Ragunathan, Vanitha and Xiong, Yan and Yang, Liyan, The Dynamics of Information Production and Diffusion: Evidence from Buy-Side Participation in Earnings Conference Calls (February 26, 2018). Rotman School of Management Working Paper No. 3130197, Available at SSRN: https://ssrn.com/abstract=3130197 or http://dx.doi.org/10.2139/ssrn.3130197

Ling Cen (Contact Author)

The Chinese University of Hong Kong ( email )

CYT Building
Sha Tin
Hong Kong, Hong Kong
Hong Kong

HOME PAGE: http:///sites.google.com/site/cenling/

Vanitha Ragunathan

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia
(07) 3365 8204 (Phone)
(07) 3365 6988 (Fax)

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Yan Xiong

The Hong Kong University of Science and Technology ( email )

HKUST
Kowloon
Hong Kong
Hong Kong

Liyan Yang

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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