Retail investor attention and herding behavior

In this paper, we argue that when individual investors can obtain information from public resources such as Google search, the degree of investor attention to a particular underlying company is positively linked with herding behavior for retail investors. Empirical results confirm that Google Search Volume Index can be a proxy for the information demand of uninformed individual investors. Empirical evidence also shows that reaching the price limit generates an attention-grabbing effect. Further, in general, small cap firms generate more intensive individual investor herding. In addition, we explore the asymmetric impact of abnormal search volume index on individual investor herding behavior for bull and bear markets, and confirm that the individual investor buy herding phenomenon is stronger in bull markets, especially for small capitalization firms. In bear markets, with greater price deterioration for large cap firms, we detect herding behavior on the sell side.     

Do Financial Markets Care about Corporate Social Responsibility Disclosure? Further Evidence from China

Corporations increasingly define their corporate social responsibility (CSR) activities as a part of their business. However, is this trend beneficial to investors? Based on an event study methodology and a sample of Chinese listed companies, we extend the literature on voluntary disclosure by exploring the role of CSR disclosure in reducing stock market information asymmetry, as proxied by share price volatility and liquidity. Our results show that the share price volatility after CSR disclosure is lower than before CSR disclosure; however, the trend is that it decreases first and then increases for three months following disclosure. Stock liquidity also significantly improves after CSR disclosure; however, it increases first and then decreases. Additionally, by dividing CSR disclosure into economic (hard) disclosure and generic (soft) disclosure, we find that the reduction in information asymmetry is higher for hard disclosure than soft disclosure, suggesting that although CSR disclosure does indeed have an impact on investors’ behaviour in China, an economic‐based disclosure contributes more substantially. Finally, to better understand the characteristics of the Chinese financial market, we also explore the role of marketisation with results that show that the effect in reducing information asymmetry is greater for companies located in a region with a higher degree of marketisation.     

信息不对称、过度自信与股价变动

信息传导的非同步和投资者情绪变化是股票市场的两个典型特征,前者会引发投资者之间出现信息不对称问题,后者主要体现为投资者过度自信,两者共同作用影响股票价格变动。本文将信息不对称和投资者过度自信情绪置于同一个分析框架,建立两阶段动态序贯定价理论模型研究现实市场上信息传导过程中股价变动的内在机制。结果表明:(1)面临新信息的进入,投资者对股票收益预期的调整与均衡价格之间具有正相关关系;(2)面临有利消息时,过度自信投资者比例越大,股票的均衡价格越高,投资收益将越低;面临不利消息时则相反;(3)随着过度自信投资者比例以及过度自信程度升高,市场风险溢价将下降;(4)投资者群体在信息传导过程中出现分化,对股价变动形成异质信念,未获取信息和获取信息但未出现过度自信的投资者认为股价被高估,获取信息且出现过度自信的投资者认为价格被低估,促使更多的交易,引发市场成交量和股价变动;(5)过度自信投资者比例与过度自信程度提高均会对市场效率产生正向影响,而对市场深度具有负向效应。最后,基于理论结果对非对称性和持续性等典型的市场波动性特征进行解释。     

Economic policy uncertainty and stock price crash risk

This paper studies the impact of economic policy uncertainty on stock price crash risk using data from China. We develop a new index to measure Chinese economic policy uncertainty and find that economic policy uncertainty has a remarkable positive effect on stock price crash risk. However, the effect reverses later. The results also indicate that the positive effect of economic policy uncertainty on stock price crash risk is more prominent for state‐owned enterprises. Moreover, this effect is more prominent for firms with higher information asymmetry and firms with greater disagreement among investors, indicating that economic policy uncertainty affects crash risk through two mechanisms: managers’ concealment of bad news and investors’ heterogeneous beliefs.     

The rapidity of price adjustments to information

This analysis suggests a relationship between the rapidity of price adjustments to information and the accuracy or reliability of the information, as it is perceived by investors. To understand this relationship, we construct a competitive two-person trading game in which investors use an equilibrium strategy to determine their level of investment in information processing. Then, we relate this equilibrium level to the rapidity of price adjustments. The relationship is subtle, however, and in different circumstances the rapidity of price adjustments may increase or decrease as the level of accuracy or reliability of the information changes. In a final section, we argue that aspects of our analysis may be useful for providing a positive theory for the rapidity of price adjustments in a securities market.     

Do foreigners facilitate information transmission in emerging markets?

Using the degree of accessibility of foreign investors to emerging stock markets, or investibility, as a proxy for the extent of foreign investments, we assess whether investibility has a significant influence on the diffusion of global market information across stocks in emerging markets. We show that greater investibility reduces price delay to global market information. We also find that returns of highly investible stocks lead those of noninvestible stocks because they incorporate global information more quickly. These results are consistent with the idea that financial liberalization in the form of greater investibility yields informationally more efficient stock prices in emerging markets.     

Stock price synchronicities and speculative trading in emerging markets

The literature suggests that the strong price synchronicity observed in emerging markets is driven by the lack of firm-specific information acquisition. This paper extends previous studies by focusing on the question of whether investors’ speculative trading behavior or market conditions make the synchronicity in emerging markets more pronounced. Our results indicate that the propensity to engage in speculative trades and a low level of linkage with the world market lead to greater stock price synchronicity. These results are consistent with the hypotheses that it is difficult to price firm-level fundamentals in a speculative market where noise trades prevail, and that less weight is attached to firm-specific fundamentals in pricing stocks in a more segmented market. The price synchronicities are largely found to be stronger in bearish markets, a finding consistent with the hypothesis that investors have increased loss aversion during bear markets, which further limits informed arbitrage.     

Fund ownership and stock price informativeness of Chinese listed firms

We examine the impact of mutual fund ownership on stock price informativeness in China. Existing evidence shows that stock price informativeness is low in China, and attributes this to firms’ lack of disclosure incentives under the weak investor protection institutional environment. Mutual funds are more sophisticated and influential than individual investors to monitor firms, and thus serve as an external governance mechanism to improve corporate transparency. However, the impact of mutual funds in China can also be moderated by state ownership of listed firms, which reduces firms’ dependence on outside investors for capital. Indeed, we find that mutual fund ownership is positively related to share price informativeness, but this effect is less pronounced among state-controlled firms. The main policy implication from our findings is that mutual funds contribute to the corporate information environment of emerging economies but further privatization of listed firms would be needed to realize greater benefit.     

Laddering IPO shares

Regulators, investors, and the financial media argue that underwriters tie Initial Public Offering (IPO) allocations to investor post-listing purchases in the issuer shares. Using unique data from the Oslo Stock Exchange (OSE) I investigate if these tie-in agreements are driven by price stabilization (reducing price falls below the offer price) or laddering (inflating prices above the offer price). I find that both stabilizing and laddering investors are rewarded with increased allocations for their service. However, only laddering investors increase allocations in very oversubscribed future issues. Secondary investors also lose from falling returns following laddering. I conclude that underwriters use both price stabilization and laddering across different IPOs. However, the rewards for cooperating investors and the economic consequences for secondary investors are much greater following laddering.     

资金占用、股价暴跌风险对信息透明度的影响研究

以1999-2014年中国 A 股主板上市公司为研究样本,考量资金占用、股价暴跌风险对信息透明度影响。结果表明：大股东的资金占用程度越高,越容易给公司股价带来暴跌风险;股价发生暴跌后管理层采取相应策略改善形象,提高公司信息透明度。鉴此,投资者应利用大股东资金占用、股价暴跌与信息透明度之间的逻辑关系,构建投资套利组合;同时监管者需加强对大股东资金占用和信息透明度的监管,保护中小投资者利益。     

Permanent trading impacts and bond yields

We analyse four years of transaction data for euro-area sovereign bonds traded on the MTS electronic platforms. In order to measure the informational content of trading activity, we estimate the permanent price response to trades. We not only find strong evidence of information asymmetry in sovereign bond markets, but also show the relevance of information asymmetry in explaining the cross-sectional variations of bond yields across a wide range of bond maturities and countries. Our results confirm that trades of more recently issued bonds and longer maturity bonds have a greater permanent effect on prices. We compare the price impact of trades for bonds across different maturity categories and find that trades of French and German bonds have the highest long-term price impact in the short maturity class, whereas trades of German bonds have the highest permanent price impact in the long maturity class. More importantly, we study the cross-section of bond yields and find that after controlling for conventional factors, investors demand higher yields for bonds with larger permanent trading impact. Interestingly, when investors face increased market uncertainty, they require even higher compensation for information asymmetry.     

Choosing to Disagree: Endogenous Dismissiveness and Overconfidence in Financial Markets

The psychology literature documents that individuals derive current utility from their beliefs about future events. We show that, as a result, investors in financial markets choose to disagree about both private information and price information. When objective price informativeness is low, each investor dismisses the private signals of others and ignores price information. In contrast, when prices are sufficiently informative, heterogeneous interpretations arise endogenously: most investors ignore prices, while the rest condition on it. Our analysis demonstrates how observed deviations from rational expectations (e.g., dismissiveness, overconfidence) arise endogenously, interact with each other, and vary with economic conditions.     

Isolating the effect of disclosure on information risk

This study examines companies with two classes of shares that entitle their holders to identical cash flow and voting rights but that are available to mutually exclusive sets of investors: A shares to domestic investors and B shares to foreign investors. Price differences between A and B shares are higher in firms with a greater disparity in the disclosures that they make to domestic and foreign investors. This association is more pronounced when the cost (benefit) of information transfer is higher (lower). The results suggest that disclosure disparity creates meaningful differences in investors' average information precision across A and B shares and thus influences the cross-sectional variation in price differences.     

The Credibility of Voluntary Disclosure and Insider Stock Transactions

We examine stock price reaction to voluntary disclosure of innovation strategy by high‐tech firms and its relation with insider stock transactions before the disclosure. We find that, despite the qualitative and subjective nature of strategy‐related disclosure, there is positive stock price reaction to the disclosure. The evidence suggests that investors view the disclosure as credible good news. We also find that the disclosure is associated with more positive stock price reaction when it is preceded by insider purchase transactions. This evidence is consistent with insider purchase enhancing the credibility of the disclosure. The credibility‐enhancing effect is found to be stronger for firms with higher degrees of information asymmetry (younger firms, firms with lower analyst following, loss firms, and firms with higher research and development (R&D) intensity). Our evidence also indicates that predisclosure insider purchase is associated with greater future abnormal returns, suggesting that managers are privy to good news shortly before the disclosure.     

股吧评论、分析师跟踪与股价崩溃风险——关于模糊信息的信息含量分析

东方财富股吧等股票论坛日渐活跃,反映了投资者对获得上市公司真实、完整、及时信息的强烈需求。尽管股吧有助于促进信息传播,但仍是非正式的信息发布平台,股吧评论本质上是一种模糊信息。为探明股吧评论的信息含量,本文以2012—2017年A股上市公司为研究样本,研究股吧评论对股价崩溃风险的影响,以及同样属于模糊信息的分析师跟踪在这一过程中可能产生的作用。实证结果表明,股吧评论分歧越小,股价崩溃风险越大,并且分析师跟踪人数和研报数量在上述影响过程中发挥中介作用。研究结果有助于厘清股吧评论影响股价崩溃风险的路径和机理,既丰富了股价崩溃风险成因的研究,也揭示了股吧评论、分析师跟踪等模糊信息的信息含量。     

Short-sale inflow and stock returns: Evidence from Japan

Using a 10-year panel of flow-based information on stock borrowings and constructing a flow-based measure for shorting demand, I examine the relation between shorting demand and subsequent stock price movements. I find that the least heavily shorted stocks tend to outperform the most heavily shorted stocks and that this outperformance persists up to three months. In addition, using proxies for information asymmetry derived from the market microstructure literature, I find that this outperformance is not confined to stocks with high information asymmetry. These empirical findings indicate that short sellers act not only as informed investors who gain negative news but also as skillful investors who detect stock price deviations from fundamental values.     

The Relationship Between Bank Risk and Earnings Management: Evidence from Japan

Using stock price data drawn from the 1990s in Japan, this paper empirically shows that bank risk is negatively associated with discretionary accruals, indicating that investors misinterpreted high reported earnings as favorable information about bank financial health. We also show that the negative relationship was very powerful prior to the major bank failures in late 1997 and 1998, but it diminished subsequent to the failures. We conclude that investors started to anticipate potential manipulation of financial reports by bank managers more rationally after the major bank failures.     

A Rational Expectations Equilibrium with Informative Trading Volume

A large number of empirical studies find that trading volume contains information about the distribution of future returns. While these studies indicate that observing volume is helpful to an outside observer of the economy it is not clear how investors within the economy can learn from trading volume. In this paper, I show how trading volume helps investors to evaluate the precision of the aggregate information in the price. I construct a model that offers a closed‐form solution of a rational expectations equilibrium where all investors learn from (1) private signals, (2) the market price, and (3) aggregate trading volume.     

Financial estimates against investors’ preferences: anchoring,denial and spillover effects

This experimental study investigates how the characteristics of an estimate in a sensitivity disclosure and the level of threat it presents to investors’ preferences interact to influence investors’ risk judgments. Firstly, I predict and find that variation in an estimate affects not only investors’ judgment on a related issue but also their future judgments on an unrelated issue. Secondly, I predict and find that investors are more sensitive to variations in an estimate when information contained in the estimate presents less threat to their preferred conclusions than when it presents greater threat. Finally, I predict and find that investors perceive more uncertainty regarding the association between the disclosed risk factor and the estimated financial reporting item in the estimate when the information presents greater threat.