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Does news affect disagreement in global markets?

Tao Chen ()

Journal of Business Research, 2020, vol. 109, issue C, 174-183

Abstract: Given the stylized fact of persistent divergent opinion in financial markets, this study examines why investors develop disagreement. Specifically, we study how gradual information flow affects the dynamic of disagreement. Using a global sample, we discover that disagreement reacts dissimilarly to good and bad news. In other words, disagreement rises (drops) with the posterior probability of informed trading on negative (positive) news. Furthermore, short-sale constraints, investor overconfidence, speculative trading, and liquidity are potential drivers of these asymmetric responses in disagreement.

Keywords: Disagreement; Information; Asymmetric response; Global markets (search for similar items in EconPapers)
JEL-codes: G12 G15 G41 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:109:y:2020:i:c:p:174-183

DOI: 10.1016/j.jbusres.2019.11.082

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