News and noise: do investors react to stock split announcements differently during periods of high and low market volatility?

Johnson, S.; Stretcher, Robert

doi:10.1007/s12197-009-9115-1

Cited by 4 publications

(3 citation statements)

References 7 publications

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“…That is why, dividend change announcements to lower dividends are followed by greater decrease in stock price during uncertain, volatile market (Docking and Koch, 2005). Johnson and Stretcher (2009) also establish that excess stock return around the stock split announcements vary depending on the level of market volatility. In order to determine the difference in the CAR between high and low volatility periods the regression equation is as follows: CARi = b0 * LV + b1 * MV + b2 * HV The dummy variables are defined in the similar manner.…”

Section: Volatility Effectsmentioning

confidence: 95%

“…They prescribe an implication by using dynamic rational expectations equilibrium model (Veronesi's Model,1999) with behavioral considerations that link the investors' reactions to market direction and volatility. The study of Johnson and Stretcher (2009) shows that excess stock return around the stock split announcements vary depending on the level of market volatility. Negative news has more impact on the variance of return or volatility than positive news (Pradhan and Narashimhan, 2002).…”

Section: Literature Reviewmentioning

confidence: 99%

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Examining Overreaction in Indian Stock Market for Quarterly News

Khatua¹,

Pradhan

2014

emaj

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Market Overreaction is a very familiar and age-old craze amongst traders. Pigou (1929) defined it as a 'conducting rod along which an error of optimism or pessimism, once generated, propagates itself about the business world.' The question of whether or not Indian stock prices market is overreacted during any stock-specific news is best answered by a comprehensive and concurrent analysis of the various tests and data available while using the event study.This study wants to address the impact of size, volatility and asymmetry in the terms of investors' overreaction to the firm-specific news not only individually but also jointly. The outcome of this study helps to solve the problem concerning the extent to which quarterly announcements have informational content, and whether the investors are affected by the signals. The present study substantiates the policy recommendation for the market players as well as for the analysts in estimating earning announcement events under different market condition and different market capitalization value of the firm.

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Section: Volatility Effectsmentioning

confidence: 95%

Section: Literature Reviewmentioning

confidence: 99%

Examining Overreaction in Indian Stock Market for Quarterly News

Khatua¹,

Pradhan

2014

emaj

View full text Add to dashboard Cite

show abstract

“…In March 2020, coinciding with the announcements of lockdown, stock market volatility increased (Lynch, 2021). High stock market volatility reduces investors' ability to detect relevant information about a specific firm (Johnson & Stretcher, 2011). Moreover, the unusually high number of tweets may contain unsubstantiated information propagated by increased user-generated Twitter activity during the lockdown announcements.…”

Section: Hypothesesmentioning

confidence: 99%

To talk or not?: An analysis of firm‐initiated social media communication's impact on firm value preservation during a massive disruption across multiple firms and industries

2022

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We examine the role of firm‐initiated social media communication using Twitter in mitigating the negative impact of large‐scale disruptions, such as the Covid‐19 pandemic, on the shareholder value of firms. We develop our hypotheses using signaling theory and test them using data collected from Twitter and Bloomberg®. Our data set consists of 121,988 firm‐generated tweets from 467 S&P 500 firms collected in March 2020 at the time of the lockdown announcement in the United States. We find that frequent and relevant communication reduces latency and increases the observability of messages, preserving a firm's shareholder value. We also find that a positive outlook and extent of interest from stakeholders results in preserving shareholder value. On average, firms lost about 1.08% of their market value per day (about 9.72% during the 9‐day period around the lockdown announcement). Our study contributes to the extant literature in three ways: (1) adds to the literature on disruptions–shareholder value by considering large‐scale disruptions such as the Covid‐19 pandemic, (2) highlights informational and communication elements of risk management strategy, and (3) adds to the growing body of literature on Twitter by considering firm‐generated tweets. The results of our study are of importance to managers as well. For instance, firms tweeted about 57 times per week, and each additional tweet could preserve about $5.85 million of a firm's market valuation, on average. Also, it is not enough that the firms took appropriate actions during a large‐scale disruption; they also need to communicate their actions and its implications to their stakeholders effectively. These results can help managers devise their Twitter communication strategy during large‐scale disruptions.

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Evidence on changes in time varying volatility around bonus and rights issue announcements

Malhotra

Thenmozhi

Kumar

2013

International Journal of Emerging Markets

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PurposeThe purpose of this paper is to examine the short‐term and long‐term stock price volatility changes around bonus and rights issue announcements, using historical volatility estimation and time varying volatility approach.Design/methodology/approachChanges in volatility around bonus and rights issues have been examined using the following methodologies. First, to capture historical volatility, change in standard deviation for 20 days and 100 days before and after announcement have been examined. Second, change in time varying volatility and unconditional volatility is examined using GARCH (1, 1) model.FindingsThe results indicate that the historical volatility has increased after bonus and rights issue announcement. The volatility persistence and unconditional variance have increased after the bonus and rights issue announcements. This evidence, extendable to any other type of issue announcement, is consistent with theories stating that volatility increases after the seasoned capital issue announcements.Originality/valueThis study analyses historical volatility, volatility persistence and unconditional volatility around bonus and rights issue announcements, which has not been observed in the previous literature. This study fills the gap in literature by empirically examining the change in short‐ and long‐term volatility before and after bonus and rights issue announcements. Moreover, measuring volatility using GARCH model overcomes the potential problem of heteroscedasticity associated with cross‐sectional data. The change in volatility persistence and unconditional volatility before and after the announcement are also examined. This study is useful for researchers and practitioners specialized in finance, international business and management, and professionals in the area of commercial policy development in emerging markets.

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News and noise: do investors react to stock split announcements differently during periods of high and low market volatility?

Abstract: Stock Splits, Noise, Information, Abnormal Returns, Volatility, Event Study, VIX, G14,

Cited by 4 publications

References 7 publications

Examining Overreaction in Indian Stock Market for Quarterly News

Examining Overreaction in Indian Stock Market for Quarterly News

To talk or not?: An analysis of firm‐initiated social media communication's impact on firm value preservation during a massive disruption across multiple firms and industries

Evidence on changes in time varying volatility around bonus and rights issue announcements

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