Abstract
Given the stylized fact of persistent divergent opinion in financial markets, this study examines why investors develop disagreement. Specifically, we study how gradual information flow affects the dynamic of disagreement. Using a global sample, we discover that disagreement reacts dissimilarly to good and bad news. In other words, disagreement rises (drops) with the posterior probability of informed trading on negative (positive) news. Furthermore, short-sale constraints, investor overconfidence, speculative trading, and liquidity are potential drivers of these asymmetric responses in disagreement.
| Original language | English |
|---|---|
| Pages (from-to) | 174-183 |
| Number of pages | 10 |
| Journal | Journal of Business Research |
| Volume | 109 |
| Early online date | 12 Dec 2019 |
| DOIs | |
| Publication status | Published - Mar 2020 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2019 Elsevier Inc.
Funding
I acknowledge the Start-up Research Grant (SRG2018-00115-FBA) from University of Macau.
Keywords
- Asymmetric response
- Disagreement
- Global markets
- Information