Differential Interpretations, Private Information and Trading Volume Around French Firms' Good News vs. Bad News Preliminary Announcements

This study provides new evidence that both differential interpretations and private information production spur trading volume for a sample of 144 preliminary earnings announcements in the French markets. After partitioning the sample into preliminary announcements that convey good news versus bad news, I find that good news stimulates more production of private information, whereas bad news leads to more differential interpretations. I further find that increased production of private information (but not differential interpretations) helps explain trading volume around good news preliminary earnings announcements. In contrast, differential interpretations (and not private information) help explain trading volume around bad news preliminary earnings announcements.