Abstract
In this paper we investigate the effects of informed trading (PIN) and information uncertainty in determining price momentum. We find that trading strategies based on buying high-uncertainty good-news stocks and shorting high-uncertainty bad-news stocks work well when limited to high-PIN stocks, while stocks with low-PIN do not exhibit price continuations, even when the uncertainty level of those stocks is high. In contrast, momentum returns are always significant for high-PIN stocks, irrespective of information uncertainty. Overall, we show that the informed trading effect is both independent of and stronger than that of information uncertainty in determining price momentum.
| Original language | English |
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| Pages (from-to) | 2095-2109 |
| Number of pages | 15 |
| Journal | Journal of Banking & Finance |
| Volume | 36 |
| Issue number | 7 |
| DOIs | |
| Publication status | Published - Jul 2012 |