Who, if Anyone, Reacts to Accrual Information?

We confirm and extend prior research that suggests accrual levels predict future returns, even after controlling for earnings surprise. We then document abnormal buying behavior around 10-K/Q filing dates that correlates with accrual level. Specifically, we extend Collins and Hribar (2000) by showing that the accrual anomaly persists for a sample of firms followed by analysts after controlling for analyst earnings forecast errors and using exact 10-K/Q filing dates. We then show that large traders, those who initiate trades of at least 5,000 shares, tend to trade in the correct direction in response to accrual information released in SEC filings after preliminary earnings. This tendency is limited, however, to cases where earnings conveyed favorable news initially. Investors who use accrual information apparently ignore stocks whose earnings convey unfavorable news or believe that accrual level is not informative for these firms. We also provide some evidence that the smallest traders react to accrual information, but in the wrong direction

Earnings expectations and investor clienteles

Abstract: Prior research suggests that the earnings expectations of some investors are systematically biased toward seasonal random walk (SRW) predictions. We provide clear and direct evidence that the net buying activity of small (large) traders around earnings announcements is significantly positively associated with SRW (analyst) forecast errors. Further, the interpretations of earnings news by the smallest and largest investors appear to be completely unrelated. Finally, small trades at the time of earnings announcements run counter to stock-price movements suggesting that small traders may impede stock prices from reflecting earnings-related information and may, therefore, play a role in post-earnings-announcement drift. Earnings Expectations and Investor Clienteles Abstract: Prior research suggests that the earnings expectations of some investors are systematically biased toward seasonal random walk (SRW) predictions. We provide clear and direct evidence that the net buying activity of small (large) traders around earnings announcements is significantly positively associated with SRW (analyst) forecast errors. Further, the interpretations of earnings news by the smallest and largest investors appear to be completely unrelated. Finally, small trades at the time of earnings announcements run counter to stock-price movements suggesting that small traders may impede stock prices from reflecting earnings-related information and may, therefore, play a role in post-earnings-announcement drift

What do we know about individual equity options?

This paper examines the empirical literature on individual equity options, discussing results in areas of consensus, showing findings in areas of disagreement and providing a guide for future research (especially highlighting analyses that cannot be performed with index options). Key topics include the impact of equity option listings on the underlying stock market, option market efficiency, anomalies in equity option returns, option market microstructure, investors' behavioural biases, option price discovery and private information revealed in equity option markets. Some directions for future research include the determinants of equity option returns and the effect of algorithmic trading in option markets

The Impact of new Execution Venues on European Equity Markets’ Liquidity – The Case of Chi-X

With the Markets in Financial Instruments Directive in effect since November 2007, new trading venues have emerged in European equities trading, among them Chi-X. This paper analyzes the impact of this new market entrant on the home market as well as on consolidated liquidity of French blue chip equities, newly tradable on Chi-X. Our findings suggest that owing to this new competition the home market’s liquidity has enhanced. This is apparently due to the battle for order flow which results in narrower spreads and increased market depth. These results imply that overall liquidity in a virtually consolidated order book is in the French case higher than without the new competitor

The Mars Science Laboratory record of optical depth measurements via solar imaging

Acknowledgments We are grateful to the teams that developed, landed, and operated Curiosity on Mars, allowing for the present study. The research was conducted partly at the Jet Propulsion Laboratory, California Institute of Technology, under a contract with the National Aeronautics and Space Administration (80NM0018D0004). MTL was supported via sub-contract 18-1187 from Malin Space Science Systems, Inc. SDG was supported by the MSL Participating Scientist program. JMB was supported by MSL Participating Scientist Grant 80NSSC22K0657. AV-R was supported by the Comunidad de Madrid Project S2018/NMT-4291 (TEC2SPACE-CM). M-PZ was supported by grant PID2019-104205GB-C21 funded by MCIN/AEI/10.13039/501100011033. JM-T was supported by UK Space Agency projects ST/W00190X/1 and ST/V00610X/1.Peer reviewedPostprin

The Mars Science Laboratory record of optical depth measurements via solar imaging

The Mars Science Laboratory Curiosity rover has monitored the Martian environment in Gale crater since landing in 2012. This study reports the record of optical depth derived from visible and near-infrared images of the Sun. Aerosol optical depth, which is mostly due to dust but also includes ice, dominates the record, with gas optical depth too small to measure. The optical depth record includes the effects of regional dust storms and one planet-encircling dust event, showing the expected peaks during southern spring and summer and relatively lower and more stable optical depth in fall and winter. The measurements show that there is a seasonally varying diurnal change in dust load, with the optical depth peaking in the morning during southern spring and summer, correlated with thermotidal pressure changes. However, there was no systematic diurnal change during autumn and winter, except after one regional storm. There were indications that the dust was relatively enhanced at high altitudes during high-optical-depth periods and that high-altitude ice was significant during winter. The observations did not provide much information about particle size or composition, but they were consistent with a smaller particle size after aphelion (in southern winter). No scattering halos were seen in associated sky images, even when there was visual evidence of ice hazes or clouds, which suggests small or amorphous ice particles. Unexpectedly, the measurement campaign revealed that the cameras collected saltating sand in their sunshades 1.97 m above the surface. As a result, the measurement strategy had to be adjusted to avoid high-elevation imaging to avoid sand covering the optics

Arbitrage opportunities in CDS term structure: theory and implications for OTC derivatives

Absence-of-Arbitrage (AoA) is the basic assumption underpinning derivatives pricing theory. As part of the OTC derivatives market, the CDS market not only provides a vehicle for participants to hedge and speculate on the default risks of corporate and sovereign entities, it also reveals important market-implied default-risk information concerning the counterparties with which financial institutions trade, and for which these financial institutions have to calculate various valuation adjustments (collectively referred to as XVA) as part of their pricing and risk management of OTC derivatives, to account for counterparty default risks. In this study, we derive No-arbitrage conditions for CDS term structures, first in a positive interest rate environment and then in an arbitrary one. Using an extensive CDS dataset which covers the 2007-09 financial crisis, we present a catalogue of 2,416 pairs of anomalous CDS contracts which violate the above conditions. Finally, we show in an example that such anomalies in the CDS term structure can lead to persistent arbitrage profits and to nonsensical default probabilities. The paper is a first systematic study on CDS-term-structure arbitrage providing model-free AoA conditions supported by ample empirical evidence