Who underreacts to cash-flow news?: evidence from trading between individuals and institutions
A large body of literature suggests that firm-level stock prices "underreact" to news about future cash flows. We estimate a vector autoregression to examine the joint behavior of returns, cash-flow news, and trading between individuals and institutions. Our main finding is that institutio...
Gespeichert in:
| Hauptverfasser: | , , |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Cambridge, Mass.
National Bureau of Economic Research
2002
|
| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
8793 |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | A large body of literature suggests that firm-level stock prices "underreact" to news about future cash flows. We estimate a vector autoregression to examine the joint behavior of returns, cash-flow news, and trading between individuals and institutions. Our main finding is that institutions buy shares from individuals in response to good cash-flow news, thus exploiting the underreaction phenomenon. Institutions are not simply following price momentum strategies: When price goes up in the absence of positive cash-flow news, institutions sell shares to individuals. The response of institutional ownership to cash-flow news is weaker for small stocks. Since small stocks also exhibit the strongest underreaction patterns, this finding is consistent with institutions facing exogenous constraints in trading small stocks. |
| Beschreibung: | 40, [29] S. graph. Darst. |
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| id | DE-604.BV023588870 |
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| index_date | 2024-07-02T22:41:24Z |
| indexdate | 2024-07-09T21:25:05Z |
| institution | BVB |
| language | English |
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| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Cohen, Randolph B. Verfasser (DE-588)124550754 aut Who underreacts to cash-flow news? evidence from trading between individuals and institutions Randolph B. Cohen ; Paul A. Gompers ; Tuomo Vuolteenaho Cambridge, Mass. National Bureau of Economic Research 2002 40, [29] S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 8793 A large body of literature suggests that firm-level stock prices "underreact" to news about future cash flows. We estimate a vector autoregression to examine the joint behavior of returns, cash-flow news, and trading between individuals and institutions. Our main finding is that institutions buy shares from individuals in response to good cash-flow news, thus exploiting the underreaction phenomenon. Institutions are not simply following price momentum strategies: When price goes up in the absence of positive cash-flow news, institutions sell shares to individuals. The response of institutional ownership to cash-flow news is weaker for small stocks. Since small stocks also exhibit the strongest underreaction patterns, this finding is consistent with institutions facing exogenous constraints in trading small stocks. Cash flow Institutional investments Stocks Prices Gompers, Paul A. 1964- Verfasser (DE-588)124085849 aut Vuolteenaho, Tuomo Verfasser (DE-588)129252670 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 8793 (DE-604)BV002801238 8793 http://papers.nber.org/papers/w8793.pdf kostenfrei Volltext |
| spellingShingle | Cohen, Randolph B. Gompers, Paul A. 1964- Vuolteenaho, Tuomo Who underreacts to cash-flow news? evidence from trading between individuals and institutions National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Cash flow Institutional investments Stocks Prices |
| title | Who underreacts to cash-flow news? evidence from trading between individuals and institutions |
| title_auth | Who underreacts to cash-flow news? evidence from trading between individuals and institutions |
| title_exact_search | Who underreacts to cash-flow news? evidence from trading between individuals and institutions |
| title_exact_search_txtP | Who underreacts to cash-flow news? evidence from trading between individuals and institutions |
| title_full | Who underreacts to cash-flow news? evidence from trading between individuals and institutions Randolph B. Cohen ; Paul A. Gompers ; Tuomo Vuolteenaho |
| title_fullStr | Who underreacts to cash-flow news? evidence from trading between individuals and institutions Randolph B. Cohen ; Paul A. Gompers ; Tuomo Vuolteenaho |
| title_full_unstemmed | Who underreacts to cash-flow news? evidence from trading between individuals and institutions Randolph B. Cohen ; Paul A. Gompers ; Tuomo Vuolteenaho |
| title_short | Who underreacts to cash-flow news? |
| title_sort | who underreacts to cash flow news evidence from trading between individuals and institutions |
| title_sub | evidence from trading between individuals and institutions |
| topic | Cash flow Institutional investments Stocks Prices |
| topic_facet | Cash flow Institutional investments Stocks Prices |
| url | http://papers.nber.org/papers/w8793.pdf |
| volume_link | (DE-604)BV002801238 |
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