The Differential Informativeness of Positive and Negative Stock Returns

Journal of Accounting, Auditing and Finance, forthcoming

38 Pages Posted: 13 Jan 2020 Last revised: 26 May 2020

See all articles by Eli Amir

Eli Amir

Tel Aviv University

Shai Levi

Tel Aviv University

Roy Zuckerman

Tel Aviv University

Date Written: May 23, 2020

Abstract

We show negative stock returns reverse more and contain less information on the long-term changes in share prices than positive stock returns mostly on nondisclosure days, and these information differences between negative and positive returns decrease substantially on disclosure days. The results suggest investors are more likely to acquire positive information on nondisclosure days, and to obtain both negative and positive information on disclosure days. Accounting conservatism and litigation exposure compel managers to reveal their negative information in disclosures, and if managers withhold negative information they do it when investors are less likely to find the information on nondisclosure days. Moreover, we use the exogenous imposition of Reg. FD to demonstrate that positive information leakage from firms during the quarter is driving the positive slant in investors’ information. Taken together, our results suggest that disclosure plays an important role in the differential informativeness and reversals of positive and negative returns.

Keywords: Return reversals, disclosure, Regulation Fair Disclosure, information precision, information asymmetry

Suggested Citation

Amir, Eli and Levi, Shai and Zuckerman, Roy, The Differential Informativeness of Positive and Negative Stock Returns (May 23, 2020). Journal of Accounting, Auditing and Finance, forthcoming, Available at SSRN: https://ssrn.com/abstract=3508272 or http://dx.doi.org/10.2139/ssrn.3508272

Eli Amir

Tel Aviv University ( email )

312 Recanati Bldg.
69978 Tel Aviv
Israel
+972 3 640-8510 (Phone)
+972 3 640-7738 (Fax)

Shai Levi (Contact Author)

Tel Aviv University ( email )

Tel Aviv, 69978
Israel

Roy Zuckerman

Tel Aviv University ( email )

Tel Aviv
Israel

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