The wisdom of crowds and the market's response to earnings news: Evidence using the geographic dispersion of investors

IF 6.8 1区管理学 Q1 BUSINESS, FINANCE Journal of Accounting & Economics Pub Date : 2023-04-01 DOI:10.1016/j.jacceco.2022.101567

Jason V. Chen

{"title":"The wisdom of crowds and the market's response to earnings news: Evidence using the geographic dispersion of investors","authors":"Jason V. Chen","doi":"10.1016/j.jacceco.2022.101567","DOIUrl":null,"url":null,"abstract":"<div><p>The wisdom of crowds suggests that groups with more diversely informed individuals reach more informed decisions because their members are collectively more knowledgeable. I study this idea in the context of the market's response to earnings announcements by examining how information diversity across investors affects the efficiency of the price response to earnings news. I measure investors' information diversity based on their geographic dispersion, which I estimate using the locations of the requests for firms' filings to EDGAR. Greater geographic dispersion is associated with greater trading during the announcement period; this supports the use of geographic dispersion as a measure of information diversity. Consistent with my predictions, the price response to a firm's earnings news is more efficient when the firm's investors have greater information diversity. In further analysis, I find that the initial heightened trading for firms with more diversely informed investors subsides quickly after the announcement period.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"75 2","pages":"Article 101567"},"PeriodicalIF":6.8000,"publicationDate":"2023-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting & Economics","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0165410122000908","RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}

引用次数: 0

Abstract

The wisdom of crowds suggests that groups with more diversely informed individuals reach more informed decisions because their members are collectively more knowledgeable. I study this idea in the context of the market's response to earnings announcements by examining how information diversity across investors affects the efficiency of the price response to earnings news. I measure investors' information diversity based on their geographic dispersion, which I estimate using the locations of the requests for firms' filings to EDGAR. Greater geographic dispersion is associated with greater trading during the announcement period; this supports the use of geographic dispersion as a measure of information diversity. Consistent with my predictions, the price response to a firm's earnings news is more efficient when the firm's investors have greater information diversity. In further analysis, I find that the initial heightened trading for firms with more diversely informed investors subsides quickly after the announcement period.

查看原文

微信好友朋友圈 QQ好友复制链接

本刊更多论文

人群的智慧和市场对盈利消息的反应：利用投资者地理分布的证据

群体的智慧表明，拥有更多不同信息的个体的群体会做出更明智的决定，因为他们的成员集体更有知识。我通过研究投资者的信息多样性如何影响价格对盈利消息的反应效率，在市场对盈利消息反应的背景下研究了这一想法。我根据投资者的地理分布来衡量他们的信息多样性，我使用公司向EDGAR提交申请的地点来估计。更大的地理分布与公告期内更大的交易量有关；这支持使用地理分散度来衡量信息多样性。与我的预测一致，当公司的投资者拥有更大的信息多样性时，价格对公司盈利消息的反应会更有效。在进一步的分析中，我发现，投资者信息更为多样化的公司最初交易量的增加在公告期后很快就会消退。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文去求助

来源期刊

Journal of Accounting & Economics Multiple-

CiteScore

8.70

自引率

6.80%

发文量

期刊介绍： The Journal of Accounting and Economics encourages the application of economic theory to the explanation of accounting phenomena. It provides a forum for the publication of the highest quality manuscripts which employ economic analyses of accounting problems. A wide range of methodologies and topics are encouraged and covered: * The role of accounting within the firm; * The information content and role of accounting numbers in capital markets; * The role of accounting in financial contracts and in monitoring agency relationships; * The determination of accounting standards; * Government regulation of corporate disclosure and/or the Accounting profession; * The theory of the accounting firm.

期刊最新文献

Editorial Board Reflections on the founding of The Journal of Accounting and Economics Do major corporate customers deter supplier misconduct? Trading of emission allowances and reporting incentives Estimating profitability decomposition frameworks via machine learning: Implications for earnings forecasting and financial statement analysis