@article {Zhang61, author = {Ying Zhang and Hongfei Tang and Wikrom Prombutr and Steven V. Le}, title = {Pre-Event Trading Based on Value Line{\textquoteright}s Weekly Rank-Change Announcements}, volume = {11}, number = {3}, pages = {61--79}, year = {2016}, doi = {10.3905/jot.2016.11.3.061}, publisher = {Institutional Investor Journals Umbrella}, abstract = {This article investigates pre-event trading behaviors and investment returns surrounding Value Line{\textquoteright}s weekly Timeliness rank-change announcements. The findings indicate that pre-event trading is accompanied by abnormal returns and volumes that are subject to rank changes. However, pre-event trading is not detected for stocks given Value Line Initial Reviews. Performance tests show that abnormal returns for pre-event trader portfolios are unexplained by a conventional four-factor asset-pricing model. Additional tests attest that pre-event traders generate superior performance, robust to adjustments for earnings shocks, transactions costs, size effect, and market conditions. With simultaneous upgrade and downgrade information, pre-event hedging strategies are further shown to be feasible and profitable. The authors contend that Value Line{\textquoteright}s weekly Timeliness rank-change announcements generate abnormal returns for pre-event traders, exploiting an information asymmetry.TOPICS: Security analysis and valuation, factor-based models}, issn = {1559-3967}, URL = {https://jot.pm-research.com/content/11/3/61}, eprint = {https://jot.pm-research.com/content/11/3/61.full.pdf}, journal = {The Journal of Trading (Retired)} }