The Asymmetric Impacts of Good and Bad News on Opinion Divergence: Evidence from Revisions to the S&P 500 Index

Jin Yu; Haigang Zhou

The Asymmetric Impacts of Good and Bad News on Opinion Divergence: Evidence from Revisions to the S&P 500 Index

Jin Yu
, Haigang Zhou

Saint Cloud University

Research output: Contribution to journal › Article › peer-review

Abstract

Motivated by the ambiguity theory of Epstein and Schneider (2003, 2008), we hypothesize that investors' beliefs on the prospects of firms converge upon the arrival of bad news, but do not converge - or even further diverge - on the arrival of good news. We expect firms with high divergence in opinions to experience lower stock returns around the announcements of bad news but not for good news. Using revisions to the S&P 500 index between 1962 and 2008 as information events, we find overwhelming support for the hypothesis. The results are robust to controlling for alternative hypotheses of price changes around revisions to the S&P 500 index, as well as common firm characteristics.

Original language	American English
Journal	Journal of Accounting & Finance
Volume	13
State	Published - Jan 1 2013

Keywords

Accounting/Taxation

Disciplines

Finance and Financial Management

Access to Document

The Asymmetric Impacts of Good and Bad News on Opinion DivergenceFinal published version, 1.72 MBLicense: CC BY

Cite this

@article{4684f2a0509648b38bcabb30b5b7d479,

title = "The Asymmetric Impacts of Good and Bad News on Opinion Divergence: Evidence from Revisions to the S\&P 500 Index",

abstract = " Motivated by the ambiguity theory of Epstein and Schneider (2003, 2008), we hypothesize that investors' beliefs on the prospects of firms converge upon the arrival of bad news, but do not converge - or even further diverge - on the arrival of good news. We expect firms with high divergence in opinions to experience lower stock returns around the announcements of bad news but not for good news. Using revisions to the S\&P 500 index between 1962 and 2008 as information events, we find overwhelming support for the hypothesis. The results are robust to controlling for alternative hypotheses of price changes around revisions to the S\&P 500 index, as well as common firm characteristics.",

keywords = "Accounting/Taxation",

author = "Jin Yu and Haigang Zhou",

note = "Yu, J., Zhou, H. (2013). The Asymmetric Impacts of Good and Bad News on Opinion Divergence: Evidence from Revisions to the S\&P 500 Index. Journal of Accounting \& Finance, 13(1), pp. 89-107.",

year = "2013",

month = jan,

day = "1",

language = "American English",

volume = "13",

journal = "Journal of Accounting \& Finance",

}

TY - JOUR

T1 - The Asymmetric Impacts of Good and Bad News on Opinion Divergence: Evidence from Revisions to the S&P 500 Index

AU - Yu, Jin

AU - Zhou, Haigang

N1 - Yu, J., Zhou, H. (2013). The Asymmetric Impacts of Good and Bad News on Opinion Divergence: Evidence from Revisions to the S&P 500 Index. Journal of Accounting & Finance, 13(1), pp. 89-107.

PY - 2013/1/1

Y1 - 2013/1/1

N2 - Motivated by the ambiguity theory of Epstein and Schneider (2003, 2008), we hypothesize that investors' beliefs on the prospects of firms converge upon the arrival of bad news, but do not converge - or even further diverge - on the arrival of good news. We expect firms with high divergence in opinions to experience lower stock returns around the announcements of bad news but not for good news. Using revisions to the S&P 500 index between 1962 and 2008 as information events, we find overwhelming support for the hypothesis. The results are robust to controlling for alternative hypotheses of price changes around revisions to the S&P 500 index, as well as common firm characteristics.

AB - Motivated by the ambiguity theory of Epstein and Schneider (2003, 2008), we hypothesize that investors' beliefs on the prospects of firms converge upon the arrival of bad news, but do not converge - or even further diverge - on the arrival of good news. We expect firms with high divergence in opinions to experience lower stock returns around the announcements of bad news but not for good news. Using revisions to the S&P 500 index between 1962 and 2008 as information events, we find overwhelming support for the hypothesis. The results are robust to controlling for alternative hypotheses of price changes around revisions to the S&P 500 index, as well as common firm characteristics.

KW - Accounting/Taxation

UR - https://engagedscholarship.csuohio.edu/bus_facpub/28

M3 - Article

VL - 13

JO - Journal of Accounting & Finance

JF - Journal of Accounting & Finance

ER -

The Asymmetric Impacts of Good and Bad News on Opinion Divergence: Evidence from Revisions to the S&P 500 Index

Abstract

Keywords

Disciplines

Access to Document

Other files and links

Cite this