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Testing Disagreement Models

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  • Ljungqvist, Alexander
  • Chang, Yen-Cheng
  • Hsiao, Pei-Jie
  • Tseng, Kevin

Abstract

We provide plausibly identified evidence for the role of investor disagreement in asset pricing. Our natural experiment exploits the staggered implementation of EDGAR, which induces a reduction in investor disagreement. Consistent with models of investor disagreement, EDGAR inclusion helps resolve disagreement around information events, leading to stock price corrections. The reduction in disagreement following EDGAR inclusion also reduces stock price crash risk, especially among stocks with binding short-sale constraints and high investor optimism.

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  • Ljungqvist, Alexander & Chang, Yen-Cheng & Hsiao, Pei-Jie & Tseng, Kevin, 2020. "Testing Disagreement Models," CEPR Discussion Papers 14677, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14677
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