Differences Of Opinion And Stock Returns
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Differences Of Opinion And Stock Returns
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Author :
language : en
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Release Date :
Differences Of Opinion And Stock Returns written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on with categories.
Differences Of Opinion And The Cross Section Of Stock Returns
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Author : Karl Diether
language : en
Publisher:
Release Date : 2008
Differences Of Opinion And The Cross Section Of Stock Returns written by Karl Diether and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
We provide evidence that stocks with higher dispersion in analysts' earnings forecasts earn lower future returns than otherwise similar stocks. This effect is most pronounced in small stocks, and stocks that have performed poorly over the past year. Interpreting dispersion in analysts' forecasts as a proxy for differences in opinion about a stock, we show that this evidence is consistent with the hypothesis that prices will reflect the optimistic view whenever investors with the lowest valuations do not trade. By contrast, our evidence is inconsistent with a view that dispersion in analysts' forecasts proxies for risk.
Short Constraints Difference Of Opinion And Stock Returns
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Author : Mohanaraman Gopalan
language : en
Publisher:
Release Date : 2007
Short Constraints Difference Of Opinion And Stock Returns written by Mohanaraman Gopalan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
We present a new approach to analyzing the effect of short constraints on stock returns. Starting from the theory, we measure how short constrained a stock is by looking at month end outstanding short positions and other measures that proxy for heterogeneity in beliefs and ease of shorting a stock. Our proxies include analyst's forecast dispersion, institutional holdings, turnover (among others). Using monthly data for the period 1992 to 2000 on NASDAQ and NYSE stocks, we form portfolios using our measure of short constraints. We find that portfolio of stocks that are short constrained earn lower returns. We also observe that the most constrained portfolio earns a significant negative one month ahead abnormal return, after accounting for risk. One can interpret this evidence as being supportive of the common notion that constrained stocks might be priced higher today. We believe our work provides evidence that short constraints matter for asset returns. It also confirms the notion that arbitrage can sometimes be rendered ineffective in financial markets because of market frictions like short constraints which can lead to abnormal returns in stocks that are constrained. This is consistent with the idea of Limited Arbitrage of Shleifer and Vishny.
Small Investor Sentiment Differences Of Opinion And Stock Overvaluation
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Author : Xiaolin Qian
language : en
Publisher:
Release Date : 2014
Small Investor Sentiment Differences Of Opinion And Stock Overvaluation written by Xiaolin Qian and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Recent research shows that small trade imbalances are negatively associated with future stock returns. I find that this negative association only exists when stocks have initially been mispriced. In addition, mispricing occurs before the sentimental trading of small investors. In stocks with high opinion divergence, buying pressure from small investors deters the realization of negative information. Therefore, trades from retail investors do not directly cause mispricing, but they prevent price discovery and facilitate mispricing.
Sell On The News
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Author : Valentin Dimitrov
language : en
Publisher:
Release Date : 2012
Sell On The News written by Valentin Dimitrov and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
Miller (1977) hypothesizes that differences of opinion among investors about stock value result in overvaluation so long as some investors are short-sales constrained. Prior evidence on the role of differences of opinion for stock prices has not yielded convincing evidence. We test the Miller hypothesis by focusing on earnings announcements because such announcements generally reduce differences of opinion among investors and, hence, are also likely to reduce overvaluation if the Miller hypothesis is true. We provide statistically significant and economically meaningful evidence in support of the Miller hypothesis. We find that the three-day hedge returns (returns on low minus high differences of opinion stocks) around earnings announcements are 0.2749% (23% annualized) to 0.7132% (60% annualized), depending upon the proxy for differences of opinion. The results are robust to alternative explanations such as the effects of financial leverage, post-earnings-announcement-drift and earnings announcement premium. Additional analysis using institutional ownership as a proxy for short-sales constraints further strengthens our conclusions regarding the Miller hypothesis. We find that the association between differences of opinion and announcement period returns is magnified within the subsample of stocks that are most difficult for investors to sell short.
Dispersion Of Opinion And Stock Returns
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Author : William N. Goetzmann
language : en
Publisher:
Release Date : 2004
Dispersion Of Opinion And Stock Returns written by William N. Goetzmann and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Stocks categories.
Divergence Of Opinion Arbitrage Costs And Stock Returns
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Author : Jin (Ginger) Wu
language : en
Publisher:
Release Date : 2008
Divergence Of Opinion Arbitrage Costs And Stock Returns written by Jin (Ginger) Wu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
In this paper we examine how divergence of opinion affect cross-sectional asset returns for different stocks with different arbitrage costs by employing a new proxy for divergence of opinion. We generalize Tauchen and Pitts' (1983) well-known Mixture of Distribution Hypothesis (MDH), which links asset volume and volatility in a way that derives a proxy for divergence of opinion among all individual investors. This new measure is a more reliable proxy for divergence of opinion among all individual investors than the existing proxies such as dispersion in analysts' earnings forecasts and turnover. We then use this measure of divergence of opinion in an empirical asset pricing analysis. In particular, we incorporate the crucial role of divergence of opinion in the determination of cross-sectional asset returns, establishing that when divergence of opinion is high, stock prices tend to be biased upwardly, resulting in lower future returns. These effects are especially pronounced for stocks with higher arbitrage costs including idiosyncratic risks, short sale costs, and other transaction costs, which are more difficult and costly to short sell. Hence the evidence for these stocks support Miller's (1977) view that, given short-sale constraints, observed prices overweight optimistic valuations. The predictions of recent theoretical work, such as Hong and Stein (2003), are valid only for stocks with less arbitrage costs. Also, our results suggest that the idiosyncratic risk, relative to other arbitrage cost measure, incrementally explain the divergence of opinon's effect on stock returns.
Is Difference Of Opinion Among Investors A Source Of Risk
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Author : Philip Gharghori
language : en
Publisher:
Release Date : 2008
Is Difference Of Opinion Among Investors A Source Of Risk written by Philip Gharghori and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
This paper examines the relationship between difference of opinion among investors and the return on Australian equities. The paper is the first to employ both dispersion in analysts' earnings forecasts and maximum share turnover as proxies for difference of opinion among investors. We also investigate whether difference of opinion can explain the value anomaly. Our findings show that (a) difference of opinion is negatively related to stock returns and (b) it cannot explain the value anomaly. Our findings are consistent with Diether, Malloy, and Scherbina (2002) and provide strong support for Miller (1977). We reject the risk-based argument advanced by Doukas, Kim and Pantzalis (2004).
The Distribution Of Investor Beliefs Stock Ownership And Stock Returns
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Author : Gikas Hardouvelis
language : en
Publisher:
Release Date : 2021
The Distribution Of Investor Beliefs Stock Ownership And Stock Returns written by Gikas Hardouvelis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
We study theoretically and empirically the relationship between investor beliefs, ownership dispersion and stock returns. We find that high dispersion, measured by high breadth or low Herfindahl index, forecasts returns positively for large stocks, as in Chen, Hong and Stein (2002), but negatively for small stocks. We explain that relationship in a difference-of-opinion model in which stocks differ in the size of investor disagreements and the extent of belief polarization. These differences are characterized by range and kurtosis, respectively. Proxying investor beliefs by analyst forecasts, we find that range and kurtosis affect ownership dispersion in the way that our model predicts.
Differences Of Opinion And Stock Prices
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Author : Tara Bhandari
language : en
Publisher:
Release Date : 2016
Differences Of Opinion And Stock Prices written by Tara Bhandari and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
I construct a novel measure of differences of opinion based on investor holdings data which isolates the type of disagreement that is theoretically predicted to affect prices when assets are bundled or unbundled. Empirically, using the setting of corporate spin-offs, I show that differences of opinion about the two entities being separated are, as predicted, related to a significantly more positive event return. Because I focus on ex date returns, these findings cannot be explained by risk, uncertainty or the expected business impacts of the transactions. Placebo tests provide further support that other factors are not driving the results. Additional tests using mergers and closed-end funds provide consistent results, and altogether these findings provide new insight into the attribution of value created when bundling or unbundling assets.