Abstract
This study investigates odd lot trading, both odd lot trades and odd lot orders, around quarterly earnings announcements to determine whether or not odd lot traders are informed regarding the information contained in earnings announcements. We find that pre-announcement odd lot order imbalances are not positively correlated with post-announcement returns and that odd lot traders do not successfully trade around earnings announcements to earn positive market adjusted returns. Portfolios long stocks highly bought by odd lot traders in the pre-announcement period and short stocks highly-sold by odd lot traders do not outperform the market. Our results are robust when controlling for non-event negative correlations between odd lot order imbalances and returns, and controlling for earnings management practices. We conclude that odd lot traders are not in possession of earnings announcement information prior to its release to the public.
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