The relevance of dark trading for information acquisition in the German stock market
Year: 2024
Type: article
Abstract: 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.
Source: Finance research letters
Authors: Deelaka Ekanayake, Lee A. Smales, Yuanji Wen
Institution: The University of Western Australia
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,350
OpenAlex ID: W4403267416