Who Reacts to News?

Quarterly Journal of Finance, Forthcoming

53 Pages Posted: 15 Jul 2018

See all articles by Doina Chichernea

Doina Chichernea

University of Denver - Reiman School of Finance

Collin Gilstrap

University of Toledo

Kershen Huang

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship

Alex Petkevich

The University of Toledo - Department of Finance

Date Written: June 23, 2018

Abstract

We show that the positive relation between firm-level cash-flow news and institutional ownership documented by Cohen (2002) is mostly driven by short-horizon investors. Short-term institutions trade to incorporate cash-flow related information into prices and potentially reduce under-reaction to cash-flow news. In contrast, long-term institutions are more sensitive to discount-rate news, consistent with the idea that their strategy is to realize the long-term expected returns and that they care more about changes in their opportunity set. Our results support the premise that short and long-horizon institutions are potentially trading with each other based on their opposing preferences for news.

Keywords: Cash-Flow News, Discount-Rate News, Institutional Ownership, Investment Horizon

JEL Classification: G11, G12, G14

Suggested Citation

Chichernea, Doina and Gilstrap, Collin and Huang, Kershen and Petkevich, Alex, Who Reacts to News? (June 23, 2018). Quarterly Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3201678

Doina Chichernea

University of Denver - Reiman School of Finance ( email )

2101 S. University Blvd
Denver, CO 80208
United States

Collin Gilstrap

University of Toledo ( email )

Mail Stop 119, HH 3000
Toledo, OH 43606
United States

Kershen Huang (Contact Author)

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship ( email )

3301 College Avenue
Fort Lauderdale, FL 33314
United States

HOME PAGE: http://sites.google.com/site/kershenhuang/

Alex Petkevich

The University of Toledo - Department of Finance ( email )

2801 W. BANCROFT ST.
Mail Stop 103
Toledo, OH Ohio 43606
United States

HOME PAGE: http://homepages.utoledo.edu/apetkev

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