Measuring Investors' Opinion Divergence

Journal of Accounting Research, 2009

47 Pages Posted: 21 Nov 2003 Last revised: 26 Jun 2009

See all articles by Jon A. Garfinkel

Jon A. Garfinkel

University of Iowa - Tippie College of Business

Date Written: June 26, 2009


Numerous proxies for divergence of investors’ opinions have been suggested in the empirical accounting and finance literatures. I offer a new proxy constructed from proprietary limit order and market order data. This allows me to capture additional information on investors’ private valuations. Proxies from the extant literature, based on publicly available data, do not contain such information. Given my new measure, I ask which of the extant proxies correlates best with it. In my regression analysis, unexplained volume is the best proxy for opinion divergence. Conditioning on various firm-specific and order-specific characteristics generally does not change this conclusion. The main exception is the sample of firms without IBES forecast dispersion data, for which bid-ask spread is the best proxy for opinion divergence. Factor analysis also suggests that unexplained volume is the preferred proxy for opinion divergence.

Keywords: opinion divergence, volume, analyst forecasts, bid-ask spread, return volatility

JEL Classification: G14

Suggested Citation

Garfinkel, Jon A., Measuring Investors' Opinion Divergence (June 26, 2009). Journal of Accounting Research, 2009, Available at SSRN: or

Jon A. Garfinkel (Contact Author)

University of Iowa - Tippie College of Business ( email )

108 PBB
Iowa City, IA 52242-1000
United States
319-335-0943 (Phone)
319-335-3690 (Fax)


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