nach oben

Review of Quantitative Finance and Accounting

Erschienen in:

11.02.2016 | Original Research

New evidence on the effect of belief heterogeneity on stock returns

verfasst von: Jeffrey Hobbs, Hei Wai Lee, Vivek Singh

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 2/2017

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

We develop a new measure to examine the effect of the heterogeneity of beliefs among investors on stock returns. Our initial results do not support the information asymmetry hypothesis or the sidelined investor hypothesis (and thus are consistent with the unbiased prices hypothesis). However, since the first two hypotheses make opposite predictions regarding stock returns, they may both have merit but offset one another. Further analysis suggests that this is indeed the case. Overall, our results support both the information asymmetry and sidelined investor hypotheses and thus occupy middle ground in the debate on the effect of disagreement on stock returns.

Nächster Artikel Recognized intangibles and the present value of growth options

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Chen and Guo (2010) apply a version of Miller (1977) model in IPO settings to study many IPO related patterns.

For the purposes of this paper, it is immaterial if the number of buyers is greater than the number of sellers or vice versa. This is because we are concerned about the difference in opinion among traders rather than their actual preferences with respect to buying or selling. In addition, the use of absolute values aids the analysis in the next section.

We agree with the argument that stronger belief in a private signal will manifest itself in more buying or selling by an institution. Thus, the number of shares bought or sold may provide additional information. We believe our simpler measure performs as well and has the additional benefit that it helps us focus on the more fundamental issue of disagreement by removing the effect of greater dollar holdings by an institution.

We also used a more liberal 10 % increase to proxy for seasoned equity offerings. This does not materially affect our results.

Additionally, we reproduced Tables 2, 3, 4, 5 and included the abnormal returns for months 4, 5, and 6 as well as months 1, 2, and 3. The results remained unchanged. For the sake of brevity we do not report the results for months 4, 5 and 6 in this paper.

We also conducted various dependent sorts on firm size and institutional ownership. The results we obtained were very similar to those of the two independent sorts reported in Table 5.

Acemoglu D, Chernozhukov V, Muhamet Y (2006) Learning and disagreement in an uncertain world. NBER working paper series, no. 12648

Ali A, Liu M, Xu D, Yao T (2009) Why does analysts’ forecast dispersion predict stock returns? A corporate guidance perspective. Working paper SSRN

Anderson A, Ghysels E, Juergens J (2005) Do heterogeneous beliefs matter for asset pricing? Rev Financ Stud 18(3):875–924CrossRef

Aumann R (1976) Agreeing to disagree. Ann Stat 4(6):1236–1239CrossRef

Avramov D, Chordia T, Jostova G, Philipov A (2009) Dispersion in analysts’ earnings forecasts and credit rating. J Financ Econ 91(1):83–101CrossRef

Barber B, Odean T, Zhang L (2005) Out of sight, out of mind: the effects of expenses on mutual fund flows. J Bus 78(6):2095–2119CrossRef

Blackwell D, Dubins L (1962) Merging of opinions with increasing information. Ann Math Stat 33(7):882–886CrossRef

Boehme R, Danielsen B, Kumar P, Sorescu S (2009) Idiosyncratic risk and the cross-section of stock returns: Merton (1987) meets Miller (1997). J Financ Mark 12(3):438–468CrossRef

Boehmer E, Kelley E (2009) Institutional investors and the informational efficiency of prices. Rev Financ Stud 22(9):3563–3594CrossRef

Boehmer R, Danielsen B, Sorescu S (2006) Short-sale constraints, dispersion of opinion and overvaluation. J Financ Quant Anal 41(2):455–487CrossRef

Cao H, Wang T, Zhang H (2005) Model uncertainty, limited market participation and asset prices. Rev Financ Stud 18(4):1219–1251CrossRef

Carhart M (1997) On persistence in mutual fund performance. J Finance 52(1):57–82CrossRef

Chen H, Guo W (2010) Divergence of opinion and initial public offerings. Rev Quant Financ Account 34(1):59–79CrossRef

Chen J, Hong H, Stein J (2002) Breadth of ownership and stock returns. J Financ Econ 66(2–3):171–205CrossRef

Cheng C, Huang Y (2015) Differences of opinion and price reversals: evidence from the Taiwan stock exchange. Rev Pac Basin Financ Mark 18(3):1500–1523

Cragg J, Malkiel M (1982) Expectations and the Structure of Share Prices. University of Chicago Press, Chicago, ILCrossRef

Diamond D, Verrecchia R (1987) Constraints on short-selling and asset price adjustment to private information. J Financ Econ 18(2):277–311CrossRef

Diether K, Malloy C, Scherbina A (2002) Differences of opinion and the cross section of stock returns. J Finance 57(5):2113–2142CrossRef

Doukas J, Kim C, Pantzalis C (2006) Divergence of opinion and equity returns. J Financ Quant Anal 41(3):573–606CrossRef

Fama E, French K (1993) Common risk factors in the returns on stocks and bonds. J Financ Econ 33(1):3–56CrossRef

Fama E, MacBeth J (1973) Risk, return, and equilibrium: empirical tests. J Polit Econ 81(3):607–636CrossRef

Frankel R, Li X (2004) Characteristics of a firm’s information environment and the information asymmetry between insiders and outsiders. J Account Econ 37(2):229–259CrossRef

Garfinkel J (2009) Measuring investors’ opinion divergence. J Account Res 47(5):1317–1348CrossRef

Garfinkel J, Sokobin J (2006) Volume, opinion divergence, and returns: a study of post-earnings announcement drift. J Account Res 44(1):85–112CrossRef

Goetzmann W, Massa M (2005) Dispersion of opinion and stock returns. J Financ Mark 8(3):325–350CrossRef

Gompers P, Metrick A (2001) Institutional investors and equity prices. Q J Econ 116(1):229–259CrossRef

Griffin J, Harris J, Shu T, Topaloglu S (2011) Who drove and burst the tech bubble? J Finance 66(4):1251–1290CrossRef

Harris M, Raviv A (1993) Differences of opinion make a horse race. Rev Financ Stud 6(3):473–506CrossRef

He H, Wang J (1995) Differential information and dynamic behavior of stock trading volume. Rev Financ Stud 8(4):919–972CrossRef

Hong H, Stein J (2003) Differences of opinion, short-sales constraints, and market crashes. Rev Financ Stud 16(2):487–525CrossRef

Hu G, Meng J, Potter M (2007) Opinion divergence among professional investment managers. J Bus Financ Account 35(5):679–703

Johnson T (2004) Forecast dispersion and the cross section of expected returns. J Finance 59(5):1957–1978CrossRef

Kraus A, Smith M (1989) Market created risk. J Finance 44(3):557–569CrossRef

Liu C, Seasholes M (2011) Dual-listed shares and trading. Working paper, Hong Kong University of Science and Technology

Merton R (1987) A simple model of capital market equilibrium with incomplete information. J Finance 42(3):483–510CrossRef

Miller M (1977) Risk, uncertainty and divergence of opinion. J Finance 32(4):1151–1168CrossRef

Morris S (1996) Speculative investor behavior and learning. Q J Econ 111(4):1111–1133CrossRef

Naik N (1997) On aggregation of information in competitive markets: the dynamic case. J Econ Dyn Control 21(7):1199–1227CrossRef

Nofsinger J, Sias R (1999) Herding and feedback trading by institutional and individual investors. J Finance 54(6):2263–2295CrossRef

Park C (2005) Stock return predictability and the dispersion in earnings forecasts. J Bus 78(6):2351–2376CrossRef

Qu S, Starks L, Yan H (2004) Risk, dispersion of analyst forecasts and stock returns. Working paper, SSRN

Varian H (1985) Divergence of opinion in complete markets: a note. J Finance 40(1):309–317CrossRef

Viswanathan S (2002) Strategic trading, heterogeneous beliefs/information, and short constraints. Working paper, Duke University

Wang J (1993) A model of intertemporal asset prices under asymmetric information. Rev Econ Stud 60(2):249–282CrossRef

Wermers R (1999) Mutual fund trading and the impact on stock prices. J Finance 54(2):581–622CrossRef

Williams J (1977) Capital asset prices with heterogeneous beliefs. J Financ Econ 5(2):219–239CrossRef

Yan X, Zhang Z (2009) Institutional investors and equity returns: are short-term institutions better informed? Rev Financ Stud 22(2):893–924CrossRef

Yu J (2011) Disagreement and return predictability of stock portfolios. J Financ Econ 99(1):162–183CrossRef

Zhao H, Alexandridis G, Antoniou A (2006) Valuation effects of short sale constraints: the case of corporate takeovers. Euro Financ Manag 12(5):747–762CrossRef

Titel: New evidence on the effect of belief heterogeneity on stock returns
verfasst von: Jeffrey Hobbs
Hei Wai Lee
Vivek Singh
Publikationsdatum: 11.02.2016
Verlag: Springer US
Erschienen in: Review of Quantitative Finance and Accounting / Ausgabe 2/2017
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI: https://doi.org/10.1007/s11156-016-0551-7

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 2/2017

The effects of firms’ information environment on analysts’ herding behavior

Do board interlocks motivate voluntary disclosure? Evidence from Taiwan

The R&D-abnormal return anomaly: a transaction cost explanation

Recognized intangibles and the present value of growth options

Corporate taxes, capital structure, and valuation: Combining Modigliani/Miller and Miles/Ezzell

Financial investor sentiment and the boom/bust in oil prices during 2003–2008