Uninformative News, Limited Attention and Institutional Investors

58 Pages Posted: 28 Aug 2020 Last revised: 6 Apr 2022

See all articles by Maria Efthymiou

Maria Efthymiou

University of Cyprus

Andreas Milidonis

University of Cyprus - Department of Accounting and Finance

Date Written: April 5, 2022

Abstract

Using the universe of transaction-level data in the U.S. corporate bond market around uninformative downgrades, we find an abnormal increase in trading volume, abnormal bond returns and a subsequent reversal. On the contrary, we do not find a reversal for abnormal bond returns associated with informative rating actions. We then focus on the largest, domestic, institutional investor from our sample, and match individual investment transactions to firm characteristics. We document an association between restatements and abnormal trading on uninformative news. These results provide supportive evidence that some institutional investors perceive uninformative downgrades as informative, hence leading to short-lived mispricing episodes.

Keywords: : Limited Attention, Uninformative News, Institutional Investors, News Analytics.

JEL Classification: G12, G23, G24, G41

Suggested Citation

Efthymiou, Maria and Milidonis, Andreas, Uninformative News, Limited Attention and Institutional Investors (April 5, 2022). Available at SSRN: https://ssrn.com/abstract=3681822 or http://dx.doi.org/10.2139/ssrn.3681822

Maria Efthymiou

University of Cyprus ( email )

Cyprus
0035722893655 (Phone)

Andreas Milidonis (Contact Author)

University of Cyprus - Department of Accounting and Finance ( email )

P.O. Box 20537
Nicosia CY-1678
Cyprus
+357 22 893 626 (Phone)

HOME PAGE: http://www.ucy.ac.cy/~amilidon/

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