The Effect of Investor Disagreement on Wealth Gain from Corporate Spinoff Announcements

ABSTRACT This study finds that greater asymmetric timeliness of earnings in reflecting good and bad news is associated with slower resolution of investor disagreement and uncertainty at earnings announcements. These findings indicate that a potential cost of asymmetric timeliness is added complexity from requiring investors to disaggregate earnings into good and bad news components to assess the implications of the earnings announcement for their investment decisions. Such a disaggregation impedes the speed with which investor disagreement and uncertainty resolve. The findings indicate that asymmetric timeliness also delays price discovery at earnings announcements. We also find a positive relation between asymmetric timeliness and stock returns during the earnings announcement period after the initial price reaction to the announcement, which is consistent with resolution of valuation uncertainty. However, we do not find clear evidence of more net stock purchases during this period by insiders of firms with greater asymmetric timeliness. JEL Classifications: M41; G14.

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Mutual Fund Performance Evaluation and Best Clienteles

Journal of Financial and Quantitative Analysis ◽

10.1017/s002210901700045x ◽

2017 ◽

Vol 52 (4) ◽

pp. 1577-1604 ◽

Cited By ~ 3

Author(s):

Stéphane Chrétien ◽

Manel Kammoun

Keyword(s):

Performance Evaluation ◽

Mutual Funds ◽

Mutual Fund ◽

Good Deal ◽

Fund Performance ◽

Law Of One Price ◽

Mutual Fund Performance ◽

Positive Performance ◽

Clientele Effects ◽

Investor Disagreement

This paper investigates investor disagreement and clientele effects in performance evaluation by developing a measure that considers the best potential clienteles of mutual funds. In an incomplete market under law-of-one-price (LOP) and no-good-deal conditions, we obtain an upper bound on admissible performance measures that identifies the most favorable alpha. Empirically, we find that a reasonable investor disagreement leads to generally positive performance for the best clienteles. Performance disagreement by investors can be significant enough to change the average evaluation of mutual funds from negative to positive, depending on the clienteles.

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