Asymmetric Trading Costs Before Earnings Announcements: Implications for Price Discovery and Returns Online Appendix

In this online appendix, we provide supplementary results for the paper “Asymmetric Trading Costs Before Earnings Announcements: Implications for Price Discovery and Returns,” including additional evidence on the connection between asymmetric liquidity provision, abnormal order imbalances, and returns; alternative hypotheses; cross-sectional variation; time-series variation; and robustness tests. ∗We thank Audra Boone, Zhi Da, Emmanuel De George, Amit Goyal (WFA discussant), Nick Guest, Terry Hendershott, SP Kothari, Charles Lee, Russ Lundholm (Stanford discussant), Paul Tetlock, Rodrigo Verdi, Frank Zhang (Illinois discussant), and seminar participants at the 2014 Citi Quant Research Conference, Cornell University, London Business School, MIT, Nasdaq Economic Research, Stanford University Summer Camp, The University of Texas at Austin, University of Illinois, and the 2015 Western Finance Association Meeting for helpful suggestions. Email: Travis Johnson, [email protected]. Asymmetric Trading Costs Before Earnings Announcements 1 Online Appendix A. Connecting ALP, AOI, and RET This online appendix provides additional evidence that pre-announcement asymmetric liquidity provision (ALP), abnormal order imbalances (AOI), and abnormal returns (RET) are correlated. These results, together with the related evidence in the paper, indicate that these three phenomenon stem at least in part from a single underlying source, which is consistent with our frictions-based story but none of the alternatives we are aware of.