Who underreacts to cash-flow news? evidence from trading between individuals and institutions

• 成果类型: Article
• 署名作者: Cohen, RB; Gompers, PA; Vuolteenaho, T
• 署名单位: Harvard University; Harvard University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(02)00229-5
• 发表日期: 2002
• 页码: 409-462
• 关键词: Overreaction; expected-return news; Expected returns; Investor heterogeneity

摘要

A large body of literature suggests that firm-level stock prices underreact to news about future cash flows; i.e., shocks to a firm's expected cash flows are positively correlated with shocks to expected returns on its stock. We examine the joint behavior of returns, cash-flow news, and trading between individuals and institutions. Institutions buy shares from (sell shares to) individuals in response to positive (negative) cash-flow news, thus exploiting the underreaction phenomenon. Institutions are not simply following price momentum strategies: When price goes up (down) in the absence of any cash-flow news, institutions sell shares to (buy shares from) individuals. Although institutions are trading in the right direction, institutions as a group outperform individuals by only 1.44% per annum before transaction and other costs, because they are extremely conservative in deviating from the value-weighted market index. (C) 2002 Elsevier Science B.V. All rights reserved.