Spreads, depths, and the impact of earnings information: an intraday analysis |
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Authors: | Lee CMC; Mucklow B; Ready MJ |
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Institution: | 1 Department of Accounting, School of Business Administration, University of Michigan, Ann Arbor, MI 48109-1234, USA
2 University of Wisconsin, USA
z Corresponding author |
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Abstract: | For a sample of NYSE firms, we show that wide spreads are accompaniedby low depths, and that spreads widen and depths fall in responseto bigger volume. Spreads widen and depths fall in anticipationof earnings announcements; these effects are more pronouncedfor announcements with larger subsequent price changes. Spreadsare also wider following earnings announcements, but this effectdissipates quickly after controlling for volume. Collectively,our results suggest liquidity providers are sensitive to changesin information asymmetry risk and use both spreads and depthsto actively manage this risk. |
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