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Disagreement after News: Gradual Information Diffusion or Differences of Opinion?

Author

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  • Anastassia Fedyk

Abstract

This paper considers the puzzle of increased trading volume around information releases through the lens of canonical models of disagreement. I use a unique data set of clicks on news by key finance professionals to simultaneously measure gradual information diffusion and differences of opinion. I find that neither channel subsumes the other and that the two are complementary in generating trading volume around news events. Their relative strengths depend on the characteristics of the underlying information: gradual information diffusion matters more for straightforward news, while differences of opinion play a larger role around textually ambiguous news. (JEL G12, G14, G41, D84)Received January 12, 2020; editorial decision: November 24, 2020 by Editor: Jeffrey Pontiff. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Anastassia Fedyk, 2021. "Disagreement after News: Gradual Information Diffusion or Differences of Opinion?," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 11(3), pages 465-501.
    • Handle: RePEc:oup:rasset:v:11:y:2021:i:3:p:465-501.
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    File URL: http://hdl.handle.net/10.1093/rapstu/raab008
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    Citations

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    Cited by:

    1. García, Diego & Hu, Xiaowen & Rohrer, Maximilian, 2023. "The colour of finance words," Journal of Financial Economics, Elsevier, vol. 147(3), pages 525-549.
    2. Fedyk, Anastassia & Hodson, James, 2023. "When can the market identify old news?," Journal of Financial Economics, Elsevier, vol. 149(1), pages 92-113.
    3. Ben-Rephael, Azi & Cookson, J. Anthony & izhakian, yehuda, 2022. "Do I Really Want to Hear The News? Public Information Arrival and Investor Beliefs," SocArXiv ud7yw, Center for Open Science.
    4. Xiong, Yan, 2022. "Comments on “Information acquisition and expected returns: Evidence from EDGAR search traffic,” by Weikai Li and Chengzhu Sun," Journal of Economic Dynamics and Control, Elsevier, vol. 141(C).

    More about this item

    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
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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