Disclosure Standards and the Sensitivity of Returns to Mood

• 成果类型: Article
• 署名作者: Bushee, Brian J.; Friedman, Henry L.
• 署名单位: University of Pennsylvania; University of California System; University of California Los Angeles
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhv054
• 发表日期: 2016
• 页码: 787
• 关键词: INVESTOR SOPHISTICATION; accounting standards; individual investors; stock returns; INFORMATION; cost; liquidity; Sentiment; weather; WORLD

摘要

We provide evidence that higher-quality disclosure standards are associated with stock returns that are less sensitive to noise driven by investors' moods. We identify return-mood sensitivity (RMS) based on the association between index returns and urban cloudiness, a source of short-term variation in mood. Based on a stylized model, we predict and find evidence consistent with higher-quality disclosure standards reducing RMS by tilting susceptible investors' trades toward information and by facilitating sophisticated investors' arbitrage. Our findings suggest that disclosure standards play an important role in enhancing price efficiency by reducing noise in returns, particularly noise related to investors' short-term moods.