Sell on the news
Global Political Uncertainty and Asset Prices
Jonathan Brogaard et al.
Review of Financial Studies, forthcoming
Abstract:
We show that global political uncertainty, measured by the U.S. election cycle, on average, leads to a fall in equity returns in fifty non-U.S. countries. At the same time, market volatilities rise, local currencies depreciate, and sovereign bond returns increase. The effect of global political uncertainty on equity prices increases with the level of uncertainty in U.S. election outcomes and a country's equity market exposure to foreign investors, but does not vary with the country's international trade exposure. These findings suggest that global political uncertainty increases investors' aggregate risk aversion, leading to a flight to safety.
Riding the Blockchain Mania: Public Firms' Speculative 8-K Disclosures
Stephanie Cheng et al.
Management Science, forthcoming
Abstract:
This paper provides evidence on public firms' initial 8-K disclosures that mention Blockchain and investors' response to these disclosures. We categorize the description of Blockchain activities in firms' 8-Ks as Speculative (e.g., a vague future plan that involves Blockchain) or Existing (e.g., a description of Blockchain product). We document a sharp increase in the number of initial 8-K disclosures of Blockchain, particularly by Speculative firms, coinciding with the rise of Bitcoin prices and excitement in Blockchain technology in the last quarter of 2017. Investors react positively to the Blockchain 8-Ks issued by Speculative firms in the initial seven-day event window although the reaction is mostly reversed over the 30 days following the disclosure. The reaction is stronger when Bitcoin returns are more positive. Overall, our results are consistent with a situation that troubles the SEC and the financial press: investors overreact to a firm's first 8-K disclosure of a potential foray into Blockchain technology and that overreaction is a function of the Bitcoin price bubble.
KODAKCoin: A blockchain revolution or exploiting a potential cryptocurrency bubble?
Shaen Corbet et al.
Applied Economics Letters, forthcoming
Abstract:
Eastman Kodak is an American technology company that produces imaging products. In 2018, it announced its intentions to enter the crytpocurrency market, raising concerns that it could be taking advantage of a potential cryptocurrency bubble for short-term gains. We analyse the relationships between Kodak, crytocurrency and stock market index returns. We find evidence of a significant, sustained increase in both the share price and price volatility of Kodak after the KODAKCoin announcement, with an increased correlation between the price of Kodak shares and Bitcoin.
Financial Reporting Frequency and the Allocation of Investor Attention
Emmanuel De George, Minh Phan & Robert Stoumbos
Columbia University Working Paper, August 2019
Abstract:
This study examines whether and how one firm's choice of reporting frequency affects other firms. Using a setting where both semi-annual and quarterly reporting are allowed, we find that firms lose investor attention when more of their peers choose to report quarterly instead of semi-annually, and that such loss of attention is associated with a decrease in market value and in market liquidity. In additional analyses, we also examine a mandatory change in reporting frequency, and corroborate our main findings that firms lose attention when their peers report more frequently. Overall our evidence suggests that reporting frequency choices affect other firms by changing the allocation of investor attention and, in particular, that firms are negatively impacted when their peers choose to adopt a higher reporting frequency.
Attention, Acquisition Costs, or Executive Information? Using Satellite Data to Uncover the Sources of Local Information
Jung Koo Kang, Yu Ting Forester Wong & Lorien Stice-Lawrence
University of Southern California Working Paper, July 2019
Abstract:
We use novel satellite data which track the number of cars in the parking lots of 101,471 stores for 71 publicly listed U.S. retailers over the years 2009 to 2018 to explore the sources of local information. We establish car counts as a timely measure of the performance of individual stores and examine the extent to which local investors obtain information through: decreased costs of information acquisition (Acquisition Cost Channel), information obtained directly from firm management (Executive Information Channel), and increased attention (Increased Attention Channel). Our tests provide strong evidence in support of the acquisition cost channel, especially for: non-indexer investors, who we expect to be most responsive to firm information; for regions that are difficult to gather information about from a distance; and for regions where social networks are especially tightknit. We find no evidence of the executive information or increased attention channels. In an era when the common perception is that "the world is flat" and the costs to acquire information are decreasing, especially for large institutional investors, we find these results surprising and important to consider when making policy decisions about how or whether to close this gap.