Spreads, Depths, and the Impact of Earnings Information: An Intraday Analysis
- 1 April 1993
- journal article
- research article
- Published by Oxford University Press (OUP) in The Review of Financial Studies
- Vol. 6 (2) , 345-374
- https://doi.org/10.1093/rfs/6.2.345
Abstract
For a sample of NYSE firms, we show that wide spreads are accompanied by low depths, and that spreads widen and depths fall in response to bigger volume. Spreads widen and depths fall in anticipation of earnings announcements; these effects are more pronounced for announcements with larger subsequent price changes. Spreads are also wider following earnings announcements, but this effect dissipates quickly after controlling for volume. Collectively, our results suggest liquidity providers are sensitive to changes in information asymmetry risk and use both spreads and depths to actively manage this risk.Keywords
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