Effect of Regulation FD on Asymmetric Information

LeeChun, I; RosenthalLeonard,; GleasonKimberly,

doi:10.2469/faj.v60.n3.2623

Cited by 21 publications

(20 citation statements)

References 28 publications

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“…Using the two measures of information diffusion, that is, cumulative price changes (WPC) developed by Barclay and Warner (1993) and Barclay et al (2003) and information content (CumImpact) by Hasbrouck (1991), we find that the information hierarchy itself can lead to slower information diffusion and slower price discovery, which supports the predictions from our theoretical model. Furthermore, we find that the degree of asymmetric information is higher on Shanghai Stock exchange, which is consistent with the literature, for example, Lee et al (2004).…”

Section: Introductionsupporting

confidence: 92%

“…There are numerous studies, both theoretical and empirical, on the impact of information asymmetry on market quality. For instance, Lee et al (2004) and Brown et al (2008) studied the impact of disclosure on trader behavior and market quality. In contrast, there are relatively few studies that have tackled the important and interesting problem of the information hierarchy.…”

Section: Introductionmentioning

confidence: 99%

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Hierarchical information and the rate of information diffusion

Xue

Gençay

2012

Journal of Economic Dynamics and Control

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a b s t r a c tThe rate of information diffusion and, consequently, price discovery are conditional not only upon the design of the market microstructure but also the informational structure. This paper presents a market microstructure model showing that an increasing number of information hierarchies among informed competitive traders leads to a slower information diffusion rate and informational inefficiency. The model illustrates that informed traders may prefer trading with each other rather than with noise traders in the presence of information hierarchies. The empirical investigation using transaction data on China's equity market supports that the information hierarchies decrease the speed of price discovery.

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Section: Introductionsupporting

confidence: 92%

Section: Introductionmentioning

confidence: 99%

Hierarchical information and the rate of information diffusion

Xue

Gençay

2012

Journal of Economic Dynamics and Control

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“…Critics of this regulation indicated that market volatility may increase and the volume of information disseminated in the market will be reduced. However, Lee et al (2004) neither find any significant increase in volatility, nor an increase in certain components of the bid-ask spread around new releases as a result of regulation FD. During the year 2001 there were also a significant numbers of IPOs, mergers, and acquisitions that were affected by the presence of analysts; it was also the last "bullish" year of the internet "bubble", and also after this year the market became more regulated.…”

Section: Methodsmentioning

confidence: 70%

A link mining algorithm for earnings forecast and trading

Creamer

Stolfo

2008

Data Min Knowl Disc

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The objective of this paper is to present and discuss a link mining algorithm called CorpInterlock and its application to the financial domain. This algorithm selects the largest strongly connected component of a social network and ranks its vertices using several indicators of distance and centrality. These indicators are merged with other relevant indicators in order to forecast new variables using a boosting algorithm. We applied the algorithm CorpInterlock to integrate the metrics of an extended corporate interlock (social network of directors and financial analysts) with corporate fundamental variables and analysts' predictions (consensus). CorpInterlock used these metrics to forecast the trend of the cumulative abnormal return and earnings surprise of S&P 500 companies. The rationality behind this approach is that the corporate interlock has a direct effect on future earnings and returns because these variables affect directors and managers' compensation. The financial analysts engage in what the agency theory calls the "earnings game": Managers want to meet the financial forecasts of the analysts and analysts want to increase their compensation 123 420 G. Creamer, S. Stolfo or business of the company that they follow. Following the CorpInterlock algorithm, we calculated a group of well-known social network metrics and integrated with economic variables using Logitboost. We used the results of the CorpInterlock algorithm to evaluate several trading strategies. We observed an improvement of the Sharpe ratio (risk-adjustment return) when we used "long only" trading strategies with the extended corporate interlock instead of the basic corporate interlock before the regulation Fair Disclosure (FD) was adopted (1998)(1999)(2000)(2001). There was no major difference among the trading strategies after 2001. Additionally, the CorpInterlock algorithm implemented with Logitboost showed a significantly lower test error than when the CorpInterlock algorithm was implemented with logistic regression. We conclude that the CorpInterlock algorithm showed to be an effective forecasting algorithm and supported profitable trading strategies.

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“…en contraignant les compagnies à tenir des conférences téléphoniques ouvertes à l'ensemble des investisseurs actuels et potentiels, cette politique répon-dait aux nombreuses plaintes formulées par de petits investisseurs qui observaient à leurs dépens une fluctuation notable de la valeur des titres lors du déroulement des conférences téléphoniques. les études faisant écho à la mise en place de cette politique visaient ainsi soit à éclairer le caractère asymétrique des informations diffusées aux investisseurs en observant la volatilité des titres au cours des confé-rences téléphoniques (FRankeL et al, 1999 ;BoWen et al, 2002), soit à rendre compte des impacts de la nouvelle politique sur la qualité des informations transmises et sur la justesse des pronostics établis par les analystes financiers (eLesWaRaPu et al, 2004 ;iRani, 2004 ;Lee et al, 2004). toutefois, de manière générale, ces études ne s'intéressaient qu'à la transmission d'informations des compagnies vers les acteurs du marché financier.…”

Section: L'impact Des Intérêts Financiers Sur La Gestion D'entrepriseunclassified

Financiarisation de la stratégie d’entreprise et restructuration de l’industrie forestière. Étude de l’entreprise Tembec

Duhaime

Hanin

L’Italien

et al. 2010

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Cet article analyse la montée en puissance des investisseurs financiers dans le capital des entreprises, à partir de l’étude du cas de l’entreprise Tembec. La dynamique de la stratégie de la compagnie est expliquée à travers une analyse de trois discours qui contribuent à la définition de la stratégie industrielle de l’entreprise : le discours sur les caractéristiques de l’industrie, le discours de l’entreprise sur sa stratégie, et les conférences téléphoniques entre les dirigeants de l’entreprise et les analystes financiers. La financiarisation de l’activité industrielle est ainsi illustrée à travers la redéfinition des outils de mesure, de la finalité et des dimensions de la stratégie d’entreprise.This article analyzes the rise in power of financial investors in business capital, based on a case study of the company Tembec. The dynamic of the company’s corporate strategy is explained through an analysis of three exchanges and communications that contributed to shaping that strategy. These were : views expressed on the characteristics of the industry, the company’s own stance regarding its strategy, and telephone conferences held between the company’s managers and financial analysts. The financialization of the activity of an industry is illustrated through the redefinition of the measurement tools, the business purpose and aspects of corporate strategy

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Effect of Regulation FD on Asymmetric Information

Cited by 21 publications

References 28 publications

Hierarchical information and the rate of information diffusion

Hierarchical information and the rate of information diffusion

A link mining algorithm for earnings forecast and trading

Financiarisation de la stratégie d’entreprise et restructuration de l’industrie forestière. Étude de l’entreprise Tembec

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