Pervasive underreaction: Evidence from high-frequency data

• 成果类型: Article
• 署名作者: Jiang, Hao; Li, Sophia Zhengzi; Wang, Hao
• 署名单位: Michigan State University; Michigan State University's Broad College of Business; Rutgers University System; Rutgers University New Brunswick; Rutgers University Newark
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.04.003
• 发表日期: 2021
• 页码: 573-599
• 关键词: Underreaction; high-frequency; news; attention; Expectation formation

摘要

We propose a novel high-frequency decomposition of daily stock returns into news-and non-news-driven components, and uncover evidence of pervasive stock market underreaction to firm news. Prices tend to drift in the same direction as the initial market response for several days after the news arrival without reversals. A trading strategy exploiting the return drift generates high abnormal returns and remains profitable after transaction costs. To understand the economic mechanism, we find that the return drift is stronger when investors are distracted. Analysts' slow adjustments of market expectations following firm news also contribute to the market underreaction.(c) 2021 Elsevier B.V. All rights reserved.