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Who Reacts to News?

Author

Listed:
  • Doina Chichernea

    (Reiman School of Finance, Daniels College of Business, University of Denver, Denver, CO 80210, United States)

  • Collin Gilstrap

    (Neff Department of Finance, College of Business and Innovation, University of Toledo, Toledo, OH 43606, United States)

  • Kershen Huang

    (Huizenga College of Business and Entrepreneurship, Nova Southeastern University, Fort Lauderdale, FL 33314, United States)

  • Alex Petkevich

    (Neff Department of Finance, College of Business and Innovation, University of Toledo, Toledo, OH 43606, United States)

Abstract

We show that the positive relation between firm-level cash-flow news and institutional ownership documented by [Cohen et al., Journal of Financial Economics 66, 409–462.] is mostly driven by short-horizon investors. Short-term institutions trade to incorporate cash-flow related information into prices and potentially reduce under-reaction to cash-flow news. In contrast, long-term institutions are more sensitive to discount-rate news, consistent with the idea that their strategy is to realize the long-term expected returns and that they care more about changes in their opportunity set. Our results support the premise that short- and long-horizon institutions are potentially trading with each other based on their opposing preferences for news.

Suggested Citation

  • Doina Chichernea & Collin Gilstrap & Kershen Huang & Alex Petkevich, 2019. "Who Reacts to News?," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 9(01), pages 1-43, March.
    • Handle: RePEc:wsi:qjfxxx:v:09:y:2019:i:01:n:s2010139219400020
    DOI: 10.1142/S2010139219400020
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    References listed on IDEAS

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