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Testing Disagreement Models

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  • YEN‐CHENG CHANG
  • PEI‐JIE HSIAO
  • ALEXANDER LJUNGQVIST
  • KEVIN TSENG

Abstract

We provide plausibly identified evidence for the role of investor disagreement in asset pricing. Our natural experiment exploits the staggered implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, 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.

Suggested Citation

  • Yen‐Cheng Chang & Pei‐Jie Hsiao & Alexander Ljungqvist & Kevin Tseng, 2022. "Testing Disagreement Models," Journal of Finance, American Finance Association, vol. 77(4), pages 2239-2285, August.
    • Handle: RePEc:bla:jfinan:v:77:y:2022:i:4:p:2239-2285
    DOI: 10.1111/jofi.13137
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