Beauty-Contests in the Age of Financialization: Information Activism and Retail Investor Behavior

2018 ◽  
Vol 33 (1) ◽  
pp. 31-49 ◽  
Author(s):  
Laura Rickett ◽  
Pratim Datta
Keyword(s):  
New York ◽  
Information Asymmetry ◽  
Trading Volume ◽  
Abnormal Returns ◽  
Investor Behavior ◽  
Economic Conditions ◽  
Online Information ◽  
Sources Of Information ◽  
Beauty Contests ◽  
Retail Investor

Keynes (The General Theory of Employment, Interest and Money, Harcourt Brace and Co., New York, 1936) had rightfully argued that picking stocks is akin to a beauty contest. The chances of winning are amplified if one's choice matches the likelihood of the panel's choice. In this era of financialization, where profit-making has shifted to speculative sways rather than fundamental trade and commodity production measures (Krippner, Socio-Econ Rev 3(2): 173-208, 2005), similar beauty contests have become even more acute. Online, real-time media channels along with pervasive investments applications have ushered in unprecedented online financial information and retail investor interest, ranging from dealing in penny stocks to sentiment-based trading. More than information sources, similar investment sites compete to recommend investment directions and strategies, not driven by strict fundamentals used by “arbitrageurs” or rational speculators but on pseudo-signals proffered by various information investment channels with varying degrees of credibility. This behavior, referred to herein as information activism, concomitantly adds a sociopsychological dimension to the concept of financialization (Lagoarde-Segot, Int Rev Financial Anal 2016) – wherein technology-driven information reach and range contribute to financial dominance of financial actors and practices. Using information activism as a lens, this research empirically evidences the extent to which information activism affects retail investor behavior under various market conditions. This study examines the differential effects of two primary, albeit reputable, sources of information activism: an investment news channel (CNBC – Mad Money) and an online financial blog (SeekingAlpha), and the effect on investor behavior during the 2008 financial crisis. In identifying the specific downstream effects of information activism on capital markets and investor behavior, factors related to investor behavior, such as trading volume and price reaction, are analyzed surrounding information activism events. Results indicate that retail investors appear to rely on online information activists during uncertain economic conditions. Findings denote that abnormal returns are associated with information activism during uncertain economic conditions and for buy recommendations when information asymmetry is high. Abnormal trading volume is also associated with information activism during economic uncertainty and with buy recommendations when information asymmetry is high particularly for stocks exchanges where unsophisticated investors tend to trade more heavily.

Background Noise? TV Advertising Affects Real-Time Investor Behavior

2021 ◽  
Author(s):  
Jūra Liaukonytė ◽  
Alminas Žaldokas
Keyword(s):  
Real Time ◽  
Trading Volume ◽  
Data Gathering ◽  
Financial Information ◽  
Investor Behavior ◽  
Tv Advertising ◽  
Hourly Data ◽  
National Advertising ◽  
Retail Investor ◽  
Retail Trading

Using minute-by-minute TV advertising data covering some 300 firms, 327,000 ads, and $20 billion in ad spending, we study the real-time effects of TV advertising on investors’ searches for online financial information and subsequent trading activity. Our identification strategy exploits the fact that viewers in different U.S. time zones are exposed to the same programming and national advertising at different times, allowing us to control for contemporaneous confounding events. We find that an average TV ad leads to a 3% increase in EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system queries and an 8% increase in Google searches for financial information within 15 minutes of the airing of that ad. These searches translate into larger trading volume on the advertiser’s stock, driven primarily by retail investors. The findings on retail investor ad-induced trading are corroborated with hourly data from Robinhood, a popular retail trading platform. We also show that ads induce searches and trading of companies other than the advertiser, including of close rivals. Altogether, our findings suggest that advertising originally intended for consumers has a nonnegligible effect on financial markets. This paper was accepted by Karl Diether, finance.

Could What You Don’t Know Hurt You? Information Asymmetry in Land Markets in Late Antiquity

2010 ◽  
pp. 181-194
Author(s):  
P.V. (Meylekh) Viswanath ◽  
Michael Szenberg
Keyword(s):  
Information Asymmetry ◽  
Late Antiquity ◽  
Trading Volume ◽  
Middle Eastern ◽  
Second Century ◽  
Reasonable Assumption ◽  
Sources Of Information ◽  
Future Work ◽  
Common Era ◽  
Roman Palestine

Jewish legal texts are important sources of information on Middle Eastern economies in the early centuries of the Common Era (ce). This article focuses on the Rashi’s explanation of seasonality and trading volume fluctuations of land prices, as discussed in tractate Bava Kamma of the Babylonian Talmud (Roman Palestine). Although the text itself was redacted in Babylonia, it is largely a commentary on the Mishnah, an earlier text redacted in Roman Palestine toward the end of the second-century ce. It may be argued that information asymmetry is a reasonable assumption in a firm, where the activities of the managers are not easily observable. It might even be reasonable in the case of land with multiple uses. The evidence of the Talmud indicates that information asymmetry can considerably depress the prices of assets and affect the liquidity of markets. This indicates the importance of attempts to reduce information asymmetry. Future work on market frictions in antiquity might consider other examples of information asymmetry in the agricultural economies discussed in the Babylonian and Jerusalem Talmuds.

Investor Reaction to Auditors' Going Concern Emphasis of Matter: Evidence from a Natural Experiment

2018 ◽  
Vol 38 (2) ◽  
pp. 27-55 ◽  
Author(s):  
Jean Bédard ◽  
Carl Brousseau ◽  
Ann Vanstraelen
Keyword(s):  
Trading Volume ◽  
Natural Experiment ◽  
Abnormal Returns ◽  
Data Availability ◽  
Financial Statement ◽  
Regulatory Change ◽  
Price Response ◽  
Going Concern ◽  
Incremental Value ◽  
Investor Reaction

SUMMARY Using a “natural experiment” provided by a change in Canadian auditing standards requiring an emphasis of matter paragraph in the auditor's report (GC-EOM) when the financial statements include a going concern uncertainty disclosure (GC-FS), this paper examines the incremental investor reaction to the auditor's report over the related GC-FS. Conditioning on the linguistic severity of the GC-FS (weak and severe), we first document a negative price response to severe but not to weak GC-FS before the regulatory change. This implies that investors react to financial statement disclosures and account for their degree of interpretability in the absence of a GC-EOM. When the uncertainty disclosure is accompanied by a GC-EOM, we find incremental negative abnormal returns and lower abnormal trading volume only for weak GC-FS. Collectively, these findings imply that an emphasis of matter paragraph in the auditor's report can have incremental value to investors. JEL Classifications: M42; G12; G14. Data Availability: Data used are available from public sources identified in the study.

scholarly journals Information Asymmetry, Ownership Structure and Cost of Equity Capital: The Formation for Open Innovation

2021 ◽  
Vol 7 (1) ◽  
pp. 48
Author(s):  
Ade Imam Muslim ◽  
Doddy Setiawan
Keyword(s):  
Stock Market ◽  
Information Asymmetry ◽  
Ownership Structure ◽  
Trading Volume ◽  
Foreign Ownership ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Ownership Structures ◽  
The Cost

Our study aims to investigate how information asymmetry and ownership structure affect cost of equity capital. For that purpose, we collected 246 issuers over 4 years for a total of 984 observations. By using panel data processing, we found that the information asymmetry we proxied through Price non-Synchronization and trading volume had an effect on the cost of equity capital. Our results also confirmed both Agency Theory and Pecking Order Theory. Both theories are in line with the conditions of the stock market in Indonesia. In addition, we found that institutional and foreign ownership structures also had an effect on the cost of equity capital. Furthermore, our results also confirmed Interest Alignment Theory and Entrenchment Theory. Our research is expected to contribute to the debate on the existence of information asymmetry and ownership structures in relation to the cost of equity capital. We also hope that it will be a valuable input for investors in considering their investment. Moreover, from the results of this study, investors can also consider foreign ownership or institutional ownership in determining their investment. In addition, stock market regulators in Indonesia can develop approaches to minimize information asymmetry and encourage foreign investors to invest in Indonesia.

Infant Sleep Position: Pediatricians' Advice to Parents

PEDIATRICS ◽  
1995 ◽  
Vol 95 (1) ◽  
pp. 55-58
Author(s):  
Bonnie B. Hudak ◽  
Jane O'Donnell ◽  
Nadine Mazyrka
Keyword(s):  
Primary Care ◽  
New York ◽  
Primary Care Physicians ◽  
Sleep Position ◽  
Infant Sleep ◽  
Sources Of Information ◽  
Professional Literature ◽  
Infant Sleep Position ◽  
Supine Sleep ◽  
Question Survey

Objective. The American Academy of Pediatrics' (AAP) recommendation for side or supine sleep position in healthy babies has generated much controversy. We surveyed primary care physicians to determine the effect of the AAP statement on physician attitude toward infant sleep position and advice to parents. Methods. We sent a 23-question survey to 194 physicians in Western New York. The survey addressed their attitude toward the AAP recommendations and its impact on their advice to parents. Results. Of the 149 physicians treating newborns, 121 (82%) completed the questionnaire; 98% were aware of the AAP statement. The most common sources of information were the AAP (86%) and professional literature (77%). Of the respondents, 79% agreed with the AAP statement. Reasons for reservation were lack of data (64%), potential adverse consequences of supine position (52%), and their own experience (47%). Gender, years in practice, and type of reimbursement did not influence attitude toward the AAP recommendation. The AAP statement increased the frequency with which physicians routinely discussed sleep position from 34 to 70% (P < .02). Physicians recommending the prone position decreased from 57 to 7% (P < .001), while those recommending supine sleep position increased from 10 to 42% (P < .001). Conclusions. Most physicians agreed with the AAP statement and more frequently discussed sleep position following the AAP recommendations. However, they did not routinely recommend supine sleep position. The majority (69%) recommended the side position even though it is unstable. Although the AAP statement has increased discussion of infant sleep position by primary care physicians in WNY, only a minority recommend that infants sleep supine.

scholarly journals Exchange Listing Changes: Volatility and Liquidity Effects in Taiwan

2003 ◽  
Author(s):  
Lloyd P. Blenman ◽  
Dar-Hsin Chen ◽  
Chang-Wen Duan
Keyword(s):  
Trading Volume ◽  
Abnormal Returns ◽  
Relative Volatility ◽  
The Past ◽  
Listing Change ◽  
The Rose

We examine the volatility, liquidity and returns effects on stocks that switch exchange listings from the ROSE to the TSE in Taiwan from 1992 to 2000. Switching firms earn statistically positive returns before the transfer day and earn statistically negative returns after that day. We find evidence of improved liquidity, ownership dispersion and actual trading volume for such firms. The relative volatility of trading volume, compared against the firms’ own histories, and volatility of returns also increase after a listing change. We show that increased trading volume and liquidity are associated with the abnormal returns around the transfer date. We find no evidence that the past earnings of firms significantly affect the abnormal returns realized in the post-listing period.  

scholarly journals Faktor-Faktor Yang Dipertimbangkan Investor Dalam Melakukan Investasi

2011 ◽  
Vol 4 (3) ◽  
Author(s):  
Linda Ariany Mahastanti
Keyword(s):  
Educational Level ◽  
Investment Decision ◽  
Investment Decisions ◽  
Demographic Variables ◽  
Investor Behavior ◽  
Primary Data ◽  
High Educational Level ◽  
Behavioral Variables ◽  
Retail Investor ◽  
Economic Perspectives

Investor has many options in an investment with the current number of investment instruments. Previous studies of retail investor behavior have examined motivation from economic perspectives or studied relationships between economic, behavioral and demographic variables. Examination of the various utility-maximization and behavioral variables underlying individual investor behavior provides a more comprehensive understanding of the investment decision process. This research will examine the seven factors that considered investors' decisions to invest, and investor behavior in taking the decision to invest. The data used are primary data that obtained by sending questionnaires through via email at Danareksa investors domiciled in Salatiga and Semarang. The analysis method used is tabulation frequencies and cross tabulation (Crosstab). Based on the results of the research, it is known that the factors that considered investor' decisions is Neutral Information and Accounting Information factor. For the result of demographic aspects effect research against investment decision is investor who are aged 25-29 and 50-54 years which is considered all of the factors. While for sex, female consider many factors than male. For educational level with high educational level makes the investor pay attention to the factors that associated with investment decisions, and investors who invest for 1-3 years old considering many factors before making investment decisions.

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