Alphanomics: The Informational Underpinnings of Market Efficiency

Lee, Charles M.C.; So, Eric C.

doi:10.1561/1400000022

Cited by 49 publications

(19 citation statements)

References 423 publications

(539 reference statements)

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“…We find, however, that a substantial fraction of this relation remains even when we include a host of observable arbitrage cost measures. This incremental ability to explain underreaction suggests two possibilities: the observable arbitrage cost measures we use are associated with measurement error, and OFFEXCH proxies for unobservable arbitrage costs, such as the costs of arbitrage capital (Lee and So, 2015). This paper contributes to two literatures.…”

Section: Introductionmentioning

confidence: 91%

“…Second, arbitrage costs include many other factors, beyond the costs created by lower liquidity. A fuller consideration of the various factors that affect arbitrage activity includes many other costs such as the costs of financing, hedging, and model error (e.g., Lee and So 2015). Regardless, observing that OFFEXCH plays an economically and statistically significant role in explaining PEAD suggests that levels of off-exchange trading serve as a useful proxy for hard-to-measure arbitrage costs.…”

Section: Can Liquidity Measures Explain Variation In the Relation Betmentioning

confidence: 99%

“…Second, arbitrageurs trade in the direction of earnings news, to profit from this mispricing, but their incentives to do so decline as mispricing drops to levels corresponding to various arbitrage costs they face (Lee and So, 2015). If diverting uninformed trades to dark venues decreases intraday price inefficiency because prices better reflect the signal value of informed trades, it should also decrease PEAD by increasing the signal-value of arbitrageurs' trades.…”

Section: Introductionmentioning

confidence: 99%

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Off-Exchange Trading and Post Earnings Announcement Drift

2019

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Off-exchange trading, which tends to attract uninformed trades, accounts for about 35 percent of total trading volume today. Taking uninformed trades off exchanges harms liquidity but improves price discovery, indicated by a decline in intraday price inefficiency (deviation of price changes from a random walk). We examine whether it also decreases an accounting inefficiency: investor underreaction to quarterly earnings news. Our results, based on investigation of a large panel of US firms and a natural experiment created by the SEC's Tick Size Pilot program, suggest the opposite conclusion: off-exchange trading increases underreaction to earnings news. The negative effects of off-exchange trading on liquidity (less depth and wider spreads) likely increase arbitrage costs, thereby reducing arbitrage activity that partially corrects underreaction. We find that the positive relation between off-exchange trading and underreaction remains strong even when we control for a host of observable arbitrage cost measures. Levels of off-exchange trading appear to serve as a useful proxy for hard-to-measure arbitrage costs.

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Section: Introductionmentioning

confidence: 91%

Section: Can Liquidity Measures Explain Variation In the Relation Betmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Off-Exchange Trading and Post Earnings Announcement Drift

2019

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“…Er is tegenwoordig een gigantische hoeveelheid aan ondernemingsspecifieke informatie beschikbaar via het internet en sociale media (Blankespoor et al 2013;Chen et al 2014;Jame et al 2016;Drake et al 2017;Bartov et al 2018;Blankespoor et al 2018;Tang 2018). Tevens is er voldoende bewijs in de literatuur om te kunnen concluderen dat de meeste beleggers slechts beperkte tijd en middelen hebben om al deze informatie te verwerken en tot de juiste beslissingen en waarderingen te komen (Hong et al 2007;Hirshleifer et al 2009;Cohen and Lou 2012;Lee and So 2015;Dehaan et al 2017;Veenman and Verwijmeren 2018). Als gevolg hiervan blijft er een concreet risico bestaan dat ondernemingen gebruik maken van de beperkte informatieverwerkingscapaciteit van sommige beleggers, bijvoorbeeld door het gebruik van variërende non-GAAP-winstdefinities om aan de verwachtingen van analisten te voldoen (Doyle et al 2013).…”

Section: Conclusiesunclassified

Recente inzichten in het gebruik van alternatieve prestatiemaatstaven door beursgenoteerde ondernemingen

Veenman¹

2019

MAB

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Dit artikel bespreekt recente inzichten uit onderzoek naar het gebruik van alternatieve prestatiemaatstaven. Recente studies tonen aan dat ondernemingen vooral gebruik maken van alternatieve (“non-GAAP”) winstbegrippen om te kunnen voldoen aan de vraag naar waarderelevante informatie, in plaats van om gebruikers te misleiden. Dit impliceert dat voor sommige ondernemingen de huidige prestatiemetingen niet voldoen aan de vraag van externe gebruikers. Een andere conclusie is dat de bestaande literatuur zich vooral focust op de presentatie van alternatieve winstbegrippen in plaats van maatstaven zoals (Adjusted) EBITDA en Free Cash Flow. Tevens focust de literatuur zich vooral op de VS, terwijl de verslaggeving, enforcement, en toegang tot informatie substantieel anders zijn binnen Europa. Dit biedt voldoende aanknopingspunten voor toekomstig onderzoek.

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“…It facilitates price discovery, allows for the appraisal of investment opportunities, and, ultimately, enhances the optimum allocation of resources on the entire economy level. Lee and So (2014) claim that the market for information feeding financial markets deserves at least the same attention of researchers as the financial market itself. Such an assertion is plausible as the understanding of the forces underlying the market for information is vital for exploring the mechanisms of financial asset valuation.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Information needs of financial market professionals in the big data and social media era. The empirical evidence from Poland

Cwynar

Pater

et al. 2017

E-Finanse

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To meet general objectives of the article, i.e. to check the extent to which the information needs of financial market institutions are satisfied, and to learn about whether there is a transition in this realm triggered by the advent of social media and big data, we surveyed a sample of 415 financial market professionals working in Poland. We also used logit regression models, through which we processed the survey results, to identify which factors are responsible for meeting the needs. We showed that although the information needs of financial market professionals are met to a large degree, still some potential for improvement remains in this regard. We found also that respondent-specific traits are insignificant in explaining the degree of satisfaction with data and information that is used by financial market professionals. Out of firm-specific characteristic and, the value of assets under the institution’s management turned out to be the key factors explaining the distribution of responses concerning satisfaction.

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Alphanomics: The Informational Underpinnings of Market Efficiency

Cited by 49 publications

References 423 publications

Off-Exchange Trading and Post Earnings Announcement Drift

Off-Exchange Trading and Post Earnings Announcement Drift

Recente inzichten in het gebruik van alternatieve prestatiemaatstaven door beursgenoteerde ondernemingen

Information needs of financial market professionals in the big data and social media era. The empirical evidence from Poland

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