Market Reactions to Tangible and Intangible Information

58 Pages Posted: 7 Jun 2003 Last revised: 3 Nov 2010

See all articles by Kent D. Daniel

Kent D. Daniel

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

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Date Written: June 2003

Abstract

We decompose stock returns into components attributable to tangible and intangible information. A firm's tangible return is the component of its return attributable to fundamental accounting-performance information, and its intangible return is the component which is orthogonal to this information. Our evidence indicates that intangible information reliably predicts future stock returns. However, in contrast to previous research, we find that tangible returns have no forecasting power. The premia associated with intangible information pose challenges for both traditional asset pricing models and models based on psychological factors.

Suggested Citation

Daniel, Kent D. and Titman, Sheridan, Market Reactions to Tangible and Intangible Information (June 2003). NBER Working Paper No. w9743. Available at SSRN: https://ssrn.com/abstract=414701

Kent D. Daniel (Contact Author)

Columbia Business School - Finance and Economics ( email )

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Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

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United States
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512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

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United States

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