Demand for Information and Asset Pricing
Previously, academics have used the supply of information that arrives to market (e.g., macroeconomic announcements, earnings reports, or news releases) to study how information affects asset prices and anomalies, and for tests of market efficiency. In this paper, we instead use measures of institutional and retail demand for information. We show that institutional demand for information is associated with increased trading volume and significant price movements. Average returns and betas are higher on days with higher institutional demand for information. The magnitude of these effects is much larger than those associated with the supply of news. However, the impact of demand for information from retail investors, while statistically significant, is quite small in magnitude. We also show that higher institutional demand alleviates mispricing in the market. In particular, higher information processing by institutional investors dampens momentum and enhances long-term reversals. As such, when demand for information increases, the market becomes more efficient.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Mar 2017|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:bla:joares:v:6:y:1968:i::p:67-92 is not listed on IDEAS
- Zhi Da & Joseph Engelberg & Pengjie Gao, 2011. "In Search of Attention," Journal of Finance, American Finance Association, vol. 66(5), pages 1461-1499, October.
- La Porta, Rafael, et al, 1997.
" Good News for Value Stocks: Further Evidence on Market Efficiency,"
Journal of Finance,
American Finance Association, vol. 52(2), pages 859-874, June.
- Rafael La Porta & Josef Lakonishok & Andrei Shleifer & Robert Vishny, 1995. "Good News for Value Stocks: Further Evidence on Market Efficiency," NBER Working Papers 5311, National Bureau of Economic Research, Inc.
- David O. Lucca & Emanuel Moench, 2015. "The Pre-FOMC Announcement Drift," Journal of Finance, American Finance Association, vol. 70(1), pages 329-371, 02.
- David O. Lucca & Emanuel Moench, 2011. "The pre-FOMC announcement drift," Staff Reports 512, Federal Reserve Bank of New York.
- Daniel, Kent, et al, 1997. " Measuring Mutual Fund Performance with Characteristic-Based Benchmarks," Journal of Finance, American Finance Association, vol. 52(3), pages 1035-1058, July.
- Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
- Hirshleifer, David & Teoh, Siew Hong, 2003. "Limited attention, information disclosure, and financial reporting," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 337-386, December.
- Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 785-818, April.
- Peng, Lin & Xiong, Wei, 2006. "Investor attention, overconfidence and category learning," Journal of Financial Economics, Elsevier, vol. 80(3), pages 563-602, June.
- Lin Peng & Wei Xiong, 2005. "Investor Attention: Overconfidence and Category Learning," NBER Working Papers 11400, National Bureau of Economic Research, Inc.
- De Bondt, Werner F M & Thaler, Richard, 1985. " Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
- Robert F. Stambaugh & Jianfeng Yu & Yu Yuan, 2015. "Arbitrage Asymmetry and the Idiosyncratic Volatility Puzzle," Journal of Finance, American Finance Association, vol. 70(5), pages 1903-1948, October.
- Robert F. Stambaugh & Jianfeng Yu & Yu Yuan, 2012. "Arbitrage Asymmetry and the Idiosyncratic Volatility Puzzle," NBER Working Papers 18560, National Bureau of Economic Research, Inc.
- repec:hrv:faseco:30725119 is not listed on IDEAS
- Stefano Dellavigna & Joshua M. Pollet, 2009. "Investor Inattention and Friday Earnings Announcements," Journal of Finance, American Finance Association, vol. 64(2), pages 709-749, 04.
- Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-636, May-June.
- Savor, Pavel & Wilson, Mungo, 2014. "Asset pricing: A tale of two days," Journal of Financial Economics, Elsevier, vol. 113(2), pages 171-201.
- Roni Michaely & Amir Rubin & Alexander Vedrashko, 2014. "Corporate Governance and the Timing of Earnings Announcements," Review of Finance, European Finance Association, vol. 18(6), pages 2003-2044.
- Pavel Savor & Mungo Wilson, 2016. "Earnings Announcements and Systematic Risk," Journal of Finance, American Finance Association, vol. 71(1), pages 83-138, 02.
- Jegadeesh, Narasimhan & Titman, Sheridan, 1993. " Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance, American Finance Association, vol. 48(1), pages 65-91, March. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:23274. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.