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Differential Interpretation of Public Signals and Trade in Speculative Markets
Abstract
Most models of trade in speculative markets assume that agents interpret public information identically. We provide empirical evidence on the relation between the volume of trade and stock returns around public announcements, and we argue that the evidence is inconsistent with this assumption. We then develop a model of trade around public announcements that incorporates differential interpretations and is consistent with the observed volume-return relation. Then we test the standard model of belief revision underlying most models of trade using stock brokerage research analysts' earnings forecasts. The hypthesis of identical interpretations seems inconsistent with the forecast revisions in these data.
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Citations
Cited by
Corporate Disclosure Policy and Analyst Behavior.
Lang, M. H., & Lundholm, R. J. (1996) · The Accounting Review · doi:10.2308/tar-9611271989 · Cited by 2,633
Capital markets research in accounting
Kothari, S. P. (2001) · Journal of Accounting and Economics · doi:10.1016/s0165-4101(01)00030-1 · Cited by 2,560
Is All That Talk Just Noise? The Information Content of Internet Stock Message Boards
Antweiler, W., & Frank, M. Z. (2004) · The Journal of Finance · doi:10.1111/j.1540-6261.2004.00662.x · Cited by 2,373
Limited attention, information disclosure, and financial reporting
Hirshleifer, D., & Teoh, S. H. (2003) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2003.10.002 · Cited by 2,324
Verrecchia, R. E. (2001) · Journal of Accounting and Economics · doi:10.1016/s0165-4101(01)00025-8 · Cited by 2,303
Metadata
- Authors
- Kandel, E., & Pearson, N. D.
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 1995-08
- Volume
- 103
- Issue
- 4
- Pages
- 831-872
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W2094392844
- Cited by
- 1,189
- References
- 0
- FWCI
- 16.27
- Type
- journal article
- Language
- en
- Open access
- closed
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