Strategic information aggregation and learning from prices

Alvaro Pedraza

Journal of Corporate Finance, 2019, vol. 58, issue C, 208-225

Abstract: This paper studies firms' learning from stock prices and corporate investment when managers have different precisions about their investment opportunities. When informed traders and firm managers are strategic, private information is not fully incorporated into stock prices. Moreover, informed trading volume is low for firms with low quality of managerial information, leading to limited learning. Using a sample of U.S. publicly traded companies, the paper documents a positive correlation between the quality of managerial information and price informativeness. Furthermore, consistent with model predictions, the relation between managerial information and investment sensitivity to prices follows an inverse U-shape pattern.

Keywords: Corporate investment; Informed trading; Strategic interactions (search for similar items in EconPapers)
JEL-codes: C7 G14 G31 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119918301858
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:58:y:2019:i:c:p:208-225

DOI: 10.1016/j.jcorpfin.2019.05.002

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().