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Disaggregation quality, stock returns, and institutional demand

Author

Listed:
  • Jiang, George
  • Kenchington, David
  • McLemore, Ping
  • Yüksel, H.Zafer

Abstract

We find that financial statement disaggregation quality (DQ), a measure of the fineness of financial statements, is a strong predictor of future stock returns. Institutional investors prefer high-DQ stocks, and their trade gradually incorporates reporting quality into stock prices over a year following disclosures. The relationship between DQ and future stock returns and institutional investors’ preference are stronger for small firms, during higher market-wide uncertainty periods, and robust to replacing DQ with change in DQ. Our findings provide evidence that capital markets are not perfectly efficient, and the discovery of stock prices is a gradual process facilitated by institutional demand.

Suggested Citation

  • Jiang, George & Kenchington, David & McLemore, Ping & Yüksel, H.Zafer, 2024. "Disaggregation quality, stock returns, and institutional demand," Finance Research Letters, Elsevier, vol. 62(PB).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pb:s1544612324002320
    DOI: 10.1016/j.frl.2024.105202
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    More about this item

    Keywords

    Disaggregation quality (DQ); Price discovery; Cross-sectional stock returns; Institutional demand;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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