We study the incentives to acquire information from exclusive news sources versus information from popular sources in a CARA-normal asset market. Each trader is able to observe one of a finite number of news sources. Clustering on the most precise source can happen for two reasons. One is...

This paper introduces a new information density indicator to provide a more comprehensive understanding of price reactions to news and, more specifically, to the sources of jumps in financial markets. Our information density indicator, which measures the abnormal amount of noisy “ticker”...

This paper finds that the majority of stock price movements remain unexplained after controlling for both public and private information. This suggests that economists' inability to explain asset price movements is the result of either noise or naive asset pricing models.

Using the Credit Rating Agency Reform Act of 2006, we examine the credibility of mandatory disclosure by credit rating agencies (CRAs) on managerial learning from stock prices. We find an increase in investment-price sensitivity for firms affected by the Act. Consistent with managers relying...

We identify all return leader-follower pairs among individual stocks using Granger causality regressions. Thus-identified leaders can reliably predict their followers' returns out of sample, and the return predictability works at the level of individual stocks rather than industries. Our results...

We create a simple method to score ratios based on relative performance. As an example, we apply the technique to ratios identified by Standard & Poor's as key inputs to determining credit ratings. Our results show that relative scoring produces information not captured by typical ratio analysis...

We examine derivatives trading prior to takeover rumors in a sample of 1,638 publicly traded U.S. firms. The volume of options traded is abnormally high over the 5-day pre-rumor period, primarily due to the number of out-of-the-money call options traded. In addition, the direction of option...

In a globalized world, the volume of international trade is based on both import and export prices, thereby making a country's economy highly dependent on exchange rates. In order to study exchange rate movements, one frequently exploits the so-called Dornbusch overshooting model. However, the...

This paper tests several predictions from an information diffusion framework in the quarterly earnings announcement setting. First, post-announcement drift is documented only for earnings announcements that have high information content (uncertainty), measured by high abnormal trading volume and...