Are Mining Exploration Stocks More Prone to Informed Trading than Mining Production Stocks?

Empirical Research in Continuous Disclosure

“…More focused use of empirical tools is evident in a piece by Drienko and Sault (), which engaged in an analysis of the extent to which price query response announcements by companies provide value‐relevant information signals to the market in circumstances where a price or volume movement was sufficiently abrupt to lead to the issuing of a query, and where information from the company might help re‐orient prices to their fundamental values . In a similar vein to interesting research performed by Marsden and Poskitt () and Poskitt (), Drienko and Sault examined price movements around price query announcements in the two‐year period from 2007–08 and found ‘significant positive shareholder wealth and volume effects associated with query announcements’, which are followed by ‘abnormal returns observed prior to the announcement … as we fail to identify a reversal in the share price following a company announcing an absence of any information that would justify the pre‐query trading activity’ (p. 926). The authors wrote that this particular result ‘proves counterintuitive as any unexplained speculation should be invalidated by the firm expressing no legitimate justification for the fluctuation observed in the pre‐announcement period’ (p. 944).…”

Globalisation strategies and roles among Australian junior mining firms in Latin America

“…Mining exploration requires large sums of capital and, in contrast to larger mining firms, few junior firms generate cash flow from mineral production and their risk profiles are often incompatible with traditional debt funding sources (Tilton et al, 2016). They compete for high‐risk speculative investments, which are scant (Bird et al, 2013; Poskitt, 2005) and which fluctuate along with changes in commodity prices and mineral demand speculation (Connolly & Orsmond, 2011; Gilbert, 2020; Tsing, 2000). Their shares are often bought and sold as packages of derivatives, highly hedged across institutional portfolios (Emel & Huber, 2008).…”