Journal of Accounting & Finance
Finance and Financial Management
Motivated by the ambiguity theory of Epstein and Schneider (2003, 2008), we hypothesize that investors' beliefs on the prospects of firms converge upon the arrival of bad news, but do not converge - or even further diverge - on the arrival of good news. We expect firms with high divergence in opinions to experience lower stock returns around the announcements of bad news but not for good news. Using revisions to the S&P 500 index between 1962 and 2008 as information events, we find overwhelming support for the hypothesis. The results are robust to controlling for alternative hypotheses of price changes around revisions to the S&P 500 index, as well as common firm characteristics.
Yu, J., Zhou, H. (2013). The Asymmetric Impacts of Good and Bad News on Opinion Divergence: Evidence from Revisions to the S&P 500 Index. Journal of Accounting & Finance, 13(1), pp. 89-107.
copyright North American Business Press