Abstract

http://ssrn.com/abstract=2139564
 
 

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No News is News: Do Markets Underreact to Nothing?


Stefano Giglio


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Kelly Shue


University of Chicago - Booth School of Business

April 1, 2013

Chicago Booth Research Paper No. 12-41
Midwest Finance Association 2013 Annual Meeting Paper
Fama-Miller Working Paper

Abstract:     
As illustrated in the tale of “the dog that did not bark,” the absence of news and the passage of time often contain information. We test whether markets fully incorporate this information using the empirical context of mergers. During the year after merger announcement, the passage of time is informative about the probability that the merger will ultimately complete. We show that the variation in hazard rates of completion after announcement strongly predicts returns. This pattern is consistent with a behavioral model of underreaction to the passage of time and cannot be explained by changes in risk or frictions.

Number of Pages in PDF File: 71

Keywords: limited attention, no news, underreaction, merger arbitrage, hazard rates

JEL Classification: G02, G14, G34

working papers series


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Date posted: September 1, 2012 ; Last revised: April 3, 2013

Suggested Citation

Giglio, Stefano and Shue, Kelly, No News is News: Do Markets Underreact to Nothing? (April 1, 2013). Chicago Booth Research Paper No. 12-41; Midwest Finance Association 2013 Annual Meeting Paper; Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2139564 or http://dx.doi.org/10.2139/ssrn.2139564

Contact Information

Stefano Giglio (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Kelly Shue
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
HOME PAGE: http://https://sites.google.com/site/kellyshue/

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