Information, Analysts, and Stock Return Comovement

Hameed, Allaudeen; Mørck, Randall; Shen, Jianfeng; Yeung, Bernard

doi:10.1093/rfs/hhv042

Cited by 127 publications

(31 citation statements)

References 58 publications

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“…We use this measure for earnings guidance because less than 40% of the firms provide guidance (Washburn & Bromiley, 2014). 5 Finally, we include a control for the number of analysts covering a firm (Hameed, Morck, Shen, & Yeung, 2015).…”

Section: Control Variablesmentioning

confidence: 99%

The case for humble expectations: CEO humility and market performance

Petrenko

Aime

Recendes

et al. 2019

Strategic Management Journal

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Research Summary In this study, we investigate the effect of chief executive officer (CEO) humility on firm's market performance. We argue and find that firms with more humble CEOs will have better market performance but not because they actually perform better but, rather, because they benefit from an expectation discount in the market. Specifically, we show that, all else equal, financial analysts announce lower earnings per share expectations for firms with more humble CEOs. This expectation discount sets the stage for those firms to meet or beat analysts' expectations resulting in improved market performance for firms with humble CEOs. We find support for our ideas with a sample of Standard & Poor's (S&P) 500 CEOs, operationalizing CEO humility with a videometric technique. Managerial Summary In this study, we investigate the effect of CEO humility on firm's market performance. We show that firms with more humble CEOs will outperform other firms in the market because financial analysts tend to set lower market expectations for firms with more humble CEOs increasing the probability that they will outperform those expectations. Rather counterintuitively, these firms do not have better market performance because they perform better but because they face lower expectations. Ultimately, the study demonstrates the importance of CEO characteristics for external evaluations and perceptions about the firm with significant effects on investment performance.

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Section: Control Variablesmentioning

confidence: 99%

The case for humble expectations: CEO humility and market performance

Petrenko

Aime

Recendes

et al. 2019

Strategic Management Journal

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show abstract

“…Because analyst coverage is likely to change when firms switch underwriters, our results could reflect commonality in market making activity (Madureira and Underwood, 2008) or the general effect of analyst coverage on comovement found in recent work (Anton and Polk, forthcoming;Hameed, Morck, Shen and Yeung, 2010;Muslu, Rebello, and Xu, 2009). To address this concern, we replicate the analysis in Table 4 using a sample of SEOs in which the lead bank has analyst coverage of the firm at least six months prior to and following the offering.…”

Section: The Role Of Stock Analystsmentioning

confidence: 72%

“…For example, Shiller (1989) and Pindyck and Rotemberg (1993) find evidence that comovement cannot be explained by simple fundamentals such as dividends, size, or other firm characteristics. More recently, researchers have uncovered comovement based on factors such as index affiliation (Barberis, Shleifer, and Wurgler, 2005;Greenwood, 2008), value/growth labels (Boyer, 2011), nominal share prices (Green and Hwang, 2009), geographical proximity (Pirinsky and Wang, 2004;Ji, 2007;Chan, Hameed, and Lau, 2003) trading location (Froot and Dabora, 1999;Kaul, Mehrotra, and Stefanescu, 2006), and analyst coverage (Anton and Polk forthcoming;Hameed, Morck, Shen and Yeung, 2010;Muslu, Rebello, and Xu, 2009). Furthermore, excess comovement is related to correlated trading by both institutions (Pirinsky and Wang, 2006;Sun, 2007) and individual investors (Kumar and Lee, 2006).…”

Section: Introductionmentioning

confidence: 99%

Comovement and investment banking networks

Grullon

Underwood

Weston

2014

Journal of Financial Economics

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“…In this study, we follow the previous literature by using the M&As to analyze the trading behavior of insiders and institutional investors [17][18][19][20]. Some investigations have been carried out [21][22][23][24][25][26]. In addition, we also extend our research to the spillover effect of these two types of investors in the industries.…”

Section: Introductionmentioning

confidence: 96%

Insider Trading and Institutional Holdings in Mergers and Acquisitions

Wu¹,

Lin²,

Yang³

2018

ujaf

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We investigate three issues about the impact of insider trades and institutional holdings on mergers and acquisitions (M&As). First, we test how insider trades affect the trading behavior of institutional investors in M&As. Second, we test whose trading behavior, either insiders or institutional investors, has greater explanatory power for the performance of M&A firms after takeover announcements. Third, we analyze the industry-wide spillover effects of insider trades and institutional holdings. Empirically, we find that insiders and institutional investors of M&A firms may utilize similar information in their transactions because insider trades induce similar trading behavior for institutional investors. In addition, insider trades, relative to institutional holdings, have greater explanatory power for M&A firm's long-term performance. Finally, compared with insider trades, institutional holdings have a more significant spillover effect in the industry of M&A firms.

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Information, Analysts, and Stock Return Comovement

Cited by 127 publications

References 58 publications

The case for humble expectations: CEO humility and market performance

The case for humble expectations: CEO humility and market performance

Comovement and investment banking networks

Insider Trading and Institutional Holdings in Mergers and Acquisitions

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