Trading Patterns Before Unscheduled Corporate Announcements

SYNOPSIS

Using comprehensive trade-level data from India’s National Stock Exchange, covering 1,491 unscheduled corporate announcements between 2011 and 2015, we identify which categories of traders position themselves profitably in the days before public disclosure. Retail traders, and to a lesser extent proprietary manual traders, accumulate positions in the direction of the impending announcement; institutional and algorithmic traders do not. The advantage is concentrated in good news events (consistent with short-sale constraints) and in smaller stocks and is absent before scheduled earnings announcements or randomized placebo events. The pattern is consistent with insider-origin information diffusing through informal networks—broker chatter, messaging app groups, and social media—into a noisy signal that the least constrained traders can act upon but compliance-bound institutions cannot. The findings have implications for the design of pre-announcement disclosure rules and the monitoring of informal communication channels.

Data Availability: The NSE trade-level data were obtained from the National Stock Exchange of India for academic research and are subject to the Exchange’s data-sharing restrictions. Announcement and firm-level data are available from the sources cited in the text.

JEL Classifications: G14; G15; G18.