Name
Abstract | ||
|---|---|---|
AbstractWe document that stocks that experience sudden increases in idiosyncratic volatility underperform otherwise similar stocks in the future, and we propose that this phenomenon can be explained by the Miller conjecture [Miller E 1977 Risk, uncertainty, and divergence of opinion. J. Finance 324:1151-1168]. We show that volatility shocks can be traced to unusual firm-level news flow, which temporarily increases the level of investor disagreement about the firm value. At the same time, volatility shocks pose a barrier to short selling, preventing pessimistic investors from expressing their views. In the presence of divergent opinions and short-selling constraints, prices initially reflect optimistic views but adjust downward in the future as investors' opinions converge.The online appendix is available at https://doi.org/10.1287/mnsc.2017.2726. This paper was accepted by Wei Xiong, finance. |
Year | DOI | Venue |
|---|---|---|
2018 | 10.1287/mnsc.2017.2726 | Periodicals |
Keywords | Field | DocType |
unusual news flow,volatility shocks,short-sale constraints,market efficiency | Financial economics,Economics,Market efficiency,Microeconomics,Pessimism,Stock (geology),Miller,Phenomenon,Volatility (finance),Enterprise value | Journal |
Volume | Issue | ISSN |
64 | 9 | 0025-1909 |
Citations | PageRank | References |
0 | 0.34 | 0 |
Authors | ||
4 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Turan G. Bali | 1 | 19 | 4.86 |
| Andriy Bodnaruk | 2 | 0 | 0.34 |
| Anna Scherbina | 3 | 0 | 0.34 |
| Yi Tang | 4 | 3 | 5.71 |