IDEAS home Printed from https://ideas.repec.org/a/spr/reaccs/v30y2025i3d10.1007_s11142-025-09897-1.html
   My bibliography  Save this article

News-based investor disagreement and stock returns

Author

Listed:
  • Sophia Zhengzi Li

    (Rutgers University)

  • Zeyao Luan

    (Rutgers University)

Abstract

We estimate investors’ disagreement regarding firm news and assess its ability to predict stock returns. Specifically, we quantify firm-level investor disagreement through the volume-volatility elasticity surrounding firm news; higher elasticity is associated with less investor disagreement. Intuitively, disagreement introduces additional trading motives that are not driven by price changes, weakening the connection between volume and volatility. Our findings indicate that investor disagreement on news negatively predicts cross-sectional returns. We also present empirical evidence aligned with the theoretical predictions of a recently developed model by Atmaz and Basak (Journal of Finance 73 (3): 1225–1279 2018) that the negative disagreement-stock relation strengthens when the optimism effect dominates the uncertainty effect. Importantly, this predictive relationship remains robust after controlling for news heterogeneity, other volume- and volatility-based measures, and alternative channels.

Suggested Citation

  • Sophia Zhengzi Li & Zeyao Luan, 2025. "News-based investor disagreement and stock returns," Review of Accounting Studies, Springer, vol. 30(3), pages 2312-2375, September.
    • Handle: RePEc:spr:reaccs:v:30:y:2025:i:3:d:10.1007_s11142-025-09897-1
    DOI: 10.1007/s11142-025-09897-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11142-025-09897-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11142-025-09897-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:reaccs:v:30:y:2025:i:3:d:10.1007_s11142-025-09897-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.