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Massively Confused Investors Making Conspicuously Ignorant Choices (MCI–MCIC)

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  • Michael S. Rashes

Abstract

This paper examines the comovement of stocks with similar ticker symbols. For one such pair of firms, there is a significant correlation between returns, volume, and volatility at short frequencies. Deviations from “fundamental value” tend to be reversed within several days, although there is some evidence that the return comovement persists for longer horizons. Arbitrageurs appear to be limited in their ability to eliminate these deviations from fundamentals. This anomaly allows the observation of noise traders and their effect on stock prices independent of changes in information and expectations.

Suggested Citation

  • Michael S. Rashes, 2001. "Massively Confused Investors Making Conspicuously Ignorant Choices (MCI–MCIC)," Journal of Finance, American Finance Association, vol. 56(5), pages 1911-1927, October.
    • Handle: RePEc:bla:jfinan:v:56:y:2001:i:5:p:1911-1927
    DOI: 10.1111/0022-1082.00394
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