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Market Reactions to Tangible and Intangible Information

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Author Info
Kent Daniel
Sheridan Titman

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Abstract

We decompose stock returns into components attributable to tangible and intangible information. A firm's tangible return is the component of its return attributable to fundamental accounting-performance information, and its intangible return is the component which is orthogonal to this information. Our evidence indicates that intangible information reliably predicts future stock returns. However, in contrast to previous research, we find that tangible returns have no forecasting power. The premia associated with intangible information pose challenges for both traditional asset pricing models and models based on psychological factors.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9743.

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Date of creation: Jun 2003
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Handle: RePEc:nbr:nberwo:9743

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G1 - Financial Economics - - General Financial Markets

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  6. De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-95, June. [Downloadable!] (restricted)
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  2. Larry Epstein & Martin Schneider, 2005. "Ambiguity, Information Quality and Asset Pricing," RCER Working Papers 519, University of Rochester - Center for Economic Research (RCER). [Downloadable!]
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  3. Owen A. Lamont & Jeremy C. Stein, 2005. "Investor Sentiment and Corporate Finance: Micro and Macro," NBER Working Papers 11882, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Saffi, Pedro, 2008. "Expected returns and liquidity risk: Does entrepreneurial income matter?," IESE Research Papers D/749, IESE Business School. [Downloadable!]
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