Macro news and micro news: Complements or substitutes?

Hirshleifer, David; Sheng, Jinfei

doi:10.1016/j.jfineco.2021.09.012

Cited by 62 publications

(26 citation statements)

References 53 publications

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“…Thus, it is the overall increase in investor attention, learning, and information gathering that jointly contribute to the stimulation in market information efficiency with respect to earnings news. Other studies (Ben‐Rephael et al 2017; Andrei et al 2020; Hirshleifer and Sheng 2021) also suggest that stronger investor attention can increase ERCs and decrease PEAD so our study therefore provides complementary evidence by focusing on the impact of SPCs.…”

supporting

confidence: 52%

Do Firm‐Specific Stock Price Crashes Lead to a Stimulation or Distortion of Market Information Efficiency?*

Kim

Lee

Zhu

2022

Contemporary Accting Res

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Unlike prior research that focuses on determinants of firm‐specific stock price crashes (SPCs), we study the consequences of SPCs on market information efficiency. The tension underlying our research question stems from two competing explanations. As an unanticipated shock, an SPC could stimulate (distort) information efficiency by triggering investor rational attention (opinion divergence). Our identification strategy involves a difference‐in‐differences analysis in which SPC firms in the treatment sample are propensity score matched with non‐SPC firms in the industry‐peer control sample, as well as placebo tests for falsification. Consistent with the stimulation effect, we find an increase of the earnings response coefficient and a decrease in post‐earnings announcement drift, from the pre‐ to post‐SPC period, for SPC firms, but not for non‐SPC firms. Further analyses reveal that SPC firms attract increased investor attention, as reflected in greater analyst coverage and more investor access to firms' online financial filings following such an event. Using mutual fund flow redemption pressure based on hypothetical sales as an exogenous shock to SPCs, we provide evidence corroborating our causal interpretation of the main findings. Collectively, the evidence suggests that SPCs can attract increased investor attention, bringing about positive externalities by stimulating market information efficiency.

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supporting

confidence: 52%

Do Firm‐Specific Stock Price Crashes Lead to a Stimulation or Distortion of Market Information Efficiency?*

Kim

Lee

Zhu

2022

Contemporary Accting Res

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“…Our study is also related to the literature on the impact of government regulations on firms (e.g.,Bhattacharya & Daouk, 2002;Lourie et al, 2022) and changes in stock exchanges (e.g.,Bhattacharya & Spiegel, 1998).7 More generally, this paper is also related to the information environment of firms (e.g.,Bhattacharya et al, 2003;Han et al, 2009;Hirshleifer & Sheng, 2022).8 See SEC(2007, p. 13).…”

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confidence: 99%

Do investors affect financial analysts’ behavior? Evidence from short sellers

Sheng

et al. 2022

Financial Management

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We examine how short sellers affect financial analysts' forecast behavior using a natural experiment that relaxes short-sale constraints. We find that increased ease of short selling improves analyst earnings forecast quality by reducing forecast bias and increasing forecast accuracy. The improvements can be explained by both the disciplining pressure from short sellers and increased price efficiency from incorporating information in a timely manner. Although

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“…By providing comprehensive assessments and forecasts that reduce uncertainty about fundamental economic factors, the Fed neutralizes key sources of the uncertainty that investors face. In line with theoretical models that focus on complementarity in information production, the reduction in uncertainty in one key dimension incentivizes further information search that lowers uncertainty about other fundamentals (Goldstein & Yang, 2015;Hirshleifer & Sheng, 2022). Thus, while monetary contraction in the conventional sense reduces investment primarily due to credit tightening (Ottonello & Winberry, 2020), there are informational conditions whereby rising interest rates can have a positive effect on investment.…”

Section: The Fed Information Shocks: Origins and Implications On Inve...mentioning

confidence: 84%