Information Quality and Market Efficiency

Ho, Thomas S. Y.; Michaely, Roni

doi:10.2307/2331024

Cited by 91 publications

(49 citation statements)

References 9 publications

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“…Since we measure price reactions on the basis of daily excess bond returns, there should be no more price moves on the consecutive days unless the market is not efficient. Ho and Michaely (1988) demonstrate that if marginal costs of collecting and processing additional public information exceed its marginal benefit to the investor, market prices will not incorporate all publicly available information. If international investors believe that rating agencies can provide information on international issuers at lower cost, the processed information leading to a rating change or watchlisting can constitute new information to the international market.…”

Section: Information Content Hypothesismentioning

confidence: 99%

Event study concerning international bond price effects of credit rating actions

2001

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The influence of credit ratings on eurobond prices has been neglected for a long time. It is questionable whether non-US investors relate their investment decisions on US ratings and whether ratings from US agencies are relevant information sources for international capital markets. This paper examines daily excess eurobond returns associated with announcements of watchlistings and rating changes by Standard & Poor's and Moody's. Significant bond price reactions are observed for announcements of downgradings and negative watchlistings while upgradings and positive watchlistings do not cause announcement effects. Distinct from the results on national capital markets the international evidence shows that besides actual yield level and issuer type the issuer nationality is a key factor that determines the intensity of price reactions after downgrades. The price reaction is also significantly stronger for downgrades into speculative grade. This indicates, that the announcement effects can in part be explained by price pressure effects due to regulatory constraints rather than original information content of rating changes. Copyright

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Section: Information Content Hypothesismentioning

confidence: 99%

Event study concerning international bond price effects of credit rating actions

2001

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“…Investors who have fallen prey to common elementary errors, such as confusing the company Telecommunications Incorporated with the firm with ticker symbol TCI, have caused large price movements in one stock based upon news arrival in another unrelated stock (see Rashes (2001)). As another example, investors and prices sometimes react to the re-publication of information that is already public (see Ho and Michaely (1988) and Huberman and Regev (2001)). …”

Section: Introductionmentioning

confidence: 99%

Feedback and the Success of Irrational Investors

2003

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“…Size is used to capture the attention of traders in this study. Large and old firms are more efficient and less costly than small firms in acquisition of information, so, investors optimally choose and learn more about large firms (Ho & Michaely, 1988). Big firms have generally richer information environment and should have to increase stock return variation and reduce SPS.…”

Section: H1: There Exists a Significant Relationship Between Sps And mentioning

confidence: 99%