Bulls and Bears: Disagreement and Trading Volume Around News Announcements

46 Pages Posted: 23 May 2018

See all articles by Adam Booker

Adam Booker

University of Arkansas - Department of Accounting; University of Arkansas

Asher Curtis

University of Washington

Vernon J. Richardson

University of Arkansas at Fayetteville

Date Written: May 3, 2018

Abstract

We examine the association between disagreement and trading volume around news events using a novel measure of disagreement that overcomes two challenges Bamber et al. (2011) identify as facing earlier measures. Specifically, we measure disagreement based on heterogenous opinions about firm value of StockTwits users. We find strong results that both pre-existing disagreement and the change in disagreement following the earnings announcement are both associated with trading volume. We next provide novel evidence on the differential effects of attention and disagreement by examining the impact of more influential users in the StockTwits network. We find that disagreement between influential investors is associated with incrementally higher trading volume. Our measure of disagreement generalizes to other news events, consistent with the measure capturing disagreement about firm value, not just the short-term earnings prospects of the firm. Our results provide evidence consistent with the importance of both pre-existing heterogeneity between users of financial statement information and preliminary evidence that disagreement between individuals about financial information can be affected by online social networks.

Keywords: Social Media, Disagreement, Volume, Earnings Announcements

JEL Classification: M40

Suggested Citation

Booker, Adam and Curtis, Asher and Richardson, Vernon J., Bulls and Bears: Disagreement and Trading Volume Around News Announcements (May 3, 2018). Available at SSRN: https://ssrn.com/abstract=3173289 or http://dx.doi.org/10.2139/ssrn.3173289

Adam Booker

University of Arkansas - Department of Accounting ( email )

Business Bldg. 454
Fayetteville, AR 72701
United States

University of Arkansas ( email )

Fayetteville, AR 72701
United States

Asher Curtis (Contact Author)

University of Washington ( email )

Seattle, WA 98195
United States

Vernon J. Richardson

University of Arkansas at Fayetteville ( email )

401 WCOB
Fayetteville, AR 72701
United States

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