The Impact of Regulation Fair Disclosure: Trading Costs and Information Asymmetry

Eleswarapu, Venkat R.; Thompson, Rex; Venkataraman, Kumar

doi:10.1017/s0022109000003045

Cited by 235 publications

(139 citation statements)

References 25 publications

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“…For example, 1998 includes the four one-year windows beginning between July 1997 and June 1998. 17 Eleswarapu, Thompson, and Venkataraman (2004) find that information asymmetry costs declined following the implementation of Reg FD. Our results suggest this decline was related to a decline in the frequency of information events.…”

Section: Time Series and Cross-sectional Variation In α And σ Imentioning

confidence: 99%

The probability and magnitude of information events

Odders-White

Ready

2008

Journal of Financial Economics

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Models of adverse selection risk generally assume that market makers offset expected losses to informed traders with expected gains from the uninformed. We recognize that the expected loss captures a combination of two effects: 1) the probability that some traders have private information, and 2) the likely magnitude of that information. We use a maximumlikelihood approach to separately estimate the probability and the magnitude of private information and test our procedure on a simulated data set. We then estimate the parameters for NYSE-listed stocks from 1993 through 2003, and show that our estimates can be used to predict future extreme returns. Finally, we examine the time-series and cross-sectional properties of the probability and magnitude of information and find a decline in the frequency of private information events following the introduction of Regulation FD. Our results shed light on the price discovery process and have implications for many areas of finance. † Associate Professor, (608)

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Section: Time Series and Cross-sectional Variation In α And σ Imentioning

confidence: 99%

The probability and magnitude of information events

Odders-White

Ready

2008

Journal of Financial Economics

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“…On the other hand, studies have also shown that Reg FD indeed leveled the playing field among market participants (Eleswarapu, Thompson, and Venkataraman, 2004;Bushee, Matsumoto, and Miller, 2004;Chiyachantana, Jiang, Taechapiroontong, and Wood 2004;Ke, Petroni, and Yu, 2008). For example, Chiyachantana et al (2004) document that informed trading around earnings announcements declined post-Reg FD, whereas Ke et al (2008) find a decline in abnormal trading by transient institutional investors prior to a bad news break after the introduction of the new regulation.…”

Section: Role Of Regulationmentioning

confidence: 99%

Analysts’ Forecasts and Asset Pricing: A Survey

Kothari

Verdi

2016

Annu. Rev. Financ. Econ.

191

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This survey reviews the literature on sell-side analysts' forecasts and its implications for asset pricing. We review the literature on the supply and demand forces shaping analysts' forecasting decisions as well as the implications of the information they produce for both the cash flow and the discount rate components of security returns. Analysts' forecasts bring prices in line with the expectations they embody, consistent with the notion that analysts' forecast contain information about future cash flows. However, analysts' forecasts exhibit predictable biases and the market appears to underreact to the information in forecasts and not fully filter the biases in the forecasts. Analyst forecasts are also helpful in estimating expected returns on securities, but evidence on the relation between analysts' forecasts and expected returns is still scarce. We conclude by identifying unanswered questions and offering suggestions for future research.

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“…Empirical evidence has documented that information asymmetry declined after Reg FD was issued (Eleswarapu, Thompson, & Venkataraman, 2004;Heflin, Subramanyam, & Zhang, 2003;Eng, Ha, & Nabar, 2013). The empirical evidence about management's earnings guidance post Reg FD is mixed.…”

Section: Earnings and Regulatory Changesmentioning

confidence: 99%

The Effect of Regulation on the Relationship between Earnings and Stock Returns

Chichernea

Franz²

2016

AFR

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We document that disclosure and analyst regulatory changes made between 2000 and 2003 significantly diminished the magnitude of the relationship between earnings and market returns. While we observe no significant change in the relationship between returns and earnings components (i.e. cash-flows and accruals), earnings components' persistence has significantly declined post-regulation. We interpret this as evidence that a decrease in earnings quality impacted the strength of the earnings-returns relation. We find no significant change when using an international sample control group, which strengthens the claim that the weakened earnings-returns relation found for the U.S. firms is due to regulatory changes.

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The Impact of Regulation Fair Disclosure: Trading Costs and Information Asymmetry

Cited by 235 publications

References 25 publications

The probability and magnitude of information events

The probability and magnitude of information events

Analysts’ Forecasts and Asset Pricing: A Survey

The Effect of Regulation on the Relationship between Earnings and Stock Returns

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