What Makes Uninformed Traders Tick?
42 Pages Posted: 8 Feb 2016 Last revised: 16 Apr 2020
Date Written: April 15, 2020
How does access to information affect price efficiency? We address this question by studying the stock ticker; a device that disseminated price changes to brokerage offices with a ticker subscription. We find that an increased number of ticker subscriptions in a state strengthened the return continuation and return co-movement of firms headquartered in the state. Therefore, the increased dissemination of price changes appears to have decreased price efficiency by increasing uninformed trend chasing. Our results challenge the assumption that greater access to information improves price efficiency.
Keywords: Price Dissemination, Trend Chasing, Return Co-Movement
JEL Classification: G14 N2
Suggested Citation: Suggested Citation