TY - JOUR
T1 - The relevance of dark trading for information acquisition in the German stock market
AU - Ekanayake, Deelaka
AU - Smales, Lee A.
AU - Wen, Yuanji
N1 - Publisher Copyright:
© 2024 The Author(s)
PY - 2024/11
Y1 - 2024/11
N2 - The implementation of the European double volume cap (DVC) mechanism acts as an exogenous shock to help understand how restrictions on dark trading affect the price discovery process for German stocks. Using the price jump ratio as a measure of information acquisition prior to earnings announcements, we show that dark pool trading aids information acquisition. This relationship is stronger for negative earnings news, for stocks that are hard to value, and when there is uncertainty around earnings. The introduction of the DVC mechanism weakens the relationship between dark trading and pre-announcement information acquisition.
AB - The implementation of the European double volume cap (DVC) mechanism acts as an exogenous shock to help understand how restrictions on dark trading affect the price discovery process for German stocks. Using the price jump ratio as a measure of information acquisition prior to earnings announcements, we show that dark pool trading aids information acquisition. This relationship is stronger for negative earnings news, for stocks that are hard to value, and when there is uncertainty around earnings. The introduction of the DVC mechanism weakens the relationship between dark trading and pre-announcement information acquisition.
KW - Dark pools
KW - Earnings announcement
KW - Information acquisition
KW - Informed trading, Price informativeness
UR - http://www.scopus.com/inward/record.url?scp=85206316782&partnerID=8YFLogxK
U2 - 10.1016/j.frl.2024.106245
DO - 10.1016/j.frl.2024.106245
M3 - Article
AN - SCOPUS:85206316782
SN - 1544-6123
VL - 69
JO - Finance Research Letters
JF - Finance Research Letters
M1 - 106245
ER -
