The Experts below are selected from a list of 11058 Experts worldwide ranked by ideXlab platform
Adrian Buss - One of the best experts on this subject based on the ideXlab platform.
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more risk more information how passive ownership can improve Informational Efficiency
Social Science Research Network, 2020Co-Authors: Adrian Buss, Savitar SundaresanAbstract:We identify a novel economic mechanism through which passive ownership positively affects Informational Efficiency in the cross-section of firms. Passive ownership lowers the cost of capital, encouraging firms to invest more aggressively in risky growth opportunities. The resultant higher cash flow volatility induces active investors to acquire more information, implying higher price informativeness for firms with high passive ownership. These firms also have higher stock prices and higher stock-return variances. In aggregate, a rise in passive ownership can also improve Informational Efficiency if uninformed investors are crowded out. We document that our mechanism applies more generally to benchmarked institutional investors.
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institutional investors and information acquisition implications for asset prices and Informational Efficiency
Review of Financial Studies, 2019Co-Authors: Matthijs Breugem, Adrian BussAbstract:We study the joint portfolio and information choice problem of institutional investors who are concerned about their performance relative to a benchmark. Benchmarking influences information choices through two distinct economic mechanisms. First, benchmarking reduces the number of shares in investors’ portfolios that are sensitive to information. Hence, the value of private information declines. Second, benchmarking limits investors’ willingness to speculate. This not only reduces the value of private information but also adversely affects information aggregation. In equilibrium, investors acquire less information and Informational Efficiency declines. As a result, return volatility increases, and less-benchmarked institutional investors outperform more-benchmarked ones. Received May 31, 2017; editorial decision July 4, 2018 by Editor Stijn Van Nieuwerburgh. Authors have furnished supplementary code, which is available on the Oxford University Press Web site next to the link to the final published paper online.
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institutional investors and information acquisition implications for asset prices and Informational Efficiency
Research Papers in Economics, 2017Co-Authors: Matthijs Breugem, Adrian BussAbstract:We study the joint portfolio and information choice problem of institutional investors who are concerned about their performance relative to a benchmark. Benchmarking influences information choices through two distinct economic mechanisms. First, benchmarking reduces the number of shares in investors' portfolios that are sensitive to private information. Second, benchmarking limits investors' willingness to speculate. Both effects imply a decline in the value of private information. Hence, in equilibrium, investors acquire less information and Informational Efficiency declines. As a result, return volatility increases and benchmarking can cause a decline in equilibrium stock prices. Moreover, less-benchmarked institutional investors outperform more-benchmarked ones.
Chun Chang - One of the best experts on this subject based on the ideXlab platform.
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Informational Efficiency and liquidity premium as the determinants of capital structure
Journal of Financial and Quantitative Analysis, 2010Co-Authors: Chun ChangAbstract:This paper investigates how a firm’s capital structure choice affects the Informational Efficiency of its security prices in the secondary markets. We identify two new determinants of a firm’s capital structure policy: the liquidity (adverse selection) premium due to investors’ anticipated losses to informed trading, and operating Efficiency improvement due to information revelation from the firm’s security prices. We show that the capital structure decision affects traders’ incentives to acquire information and subsequently, the distribution of informed traders across debt and equity claims. When information is less imperative for improving its operating decisions, a firm issues zero or negative debt (i.e., holding excess cash reserves) in order to reduce socially wasteful information acquisition and the liquidity premium associated with it. When information is crucial for a firm’s operating decisions, the optimal debt level is one that achieves maximum information revelation at the lowest possible liquidity cost. Our model can explain why many firms consistently hold no debt. It also provides new implications for financial system design and for the relationship among leverage, liquidity premium, profitability, and the cost of information acquisition.
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Informational Efficiency and liquidity premium as the determinants of capital structure
Social Science Research Network, 2008Co-Authors: Chun ChangAbstract:This paper investigates how a firm's capital structure choice affects the Informational Efficiency of its security prices in the secondary markets. We identify two new determinants of a firm's capital structure policy: liquidity (adverse selection) premium due to investors' anticipated losses to informed trading, and operating Efficiency improvement due to information revelation from the firm's security prices. We show that capital structure decision affects traders' incentives to acquire information and subsequently, the distribution of informed traders across debt and equity claims. When information is less imperative for improving its operating decisions, a firm issues zero or negative debt (i.e., holding excess cash reserves) in order to reduce socially wasteful information acquisition and the liquidity premium associated with it. When information is crucial for a firm's operating decisions, the optimal debt level is one which achieves maximum information revelation at the lowest possible liquidity cost. Our model can explain why many firms consistently hold no debt. It also provides new implications for financial system design and for the relationship among leverage, liquidity premium, profitability, and the cost of information acquisition.
Yuan Zou - One of the best experts on this subject based on the ideXlab platform.
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ETF Activity and Informational Efficiency of Underlying Securities
Management Science, 2021Co-Authors: Lawrence R. Glosten, Suresh Nallareddy, Yuan ZouAbstract:This paper investigates the effect of exchange-traded funds’ (ETFs’) activity on the short-run Informational Efficiency of their underlying securities. We find that ETF activity increases short-run...
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ETF Activity and Informational Efficiency of Underlying Securities
SSRN Electronic Journal, 2016Co-Authors: Lawrence R. Glosten, Suresh Nallareddy, Yuan ZouAbstract:This paper investigates the effect of exchange-traded funds’ (ETF) trading activity on the Informational Efficiency of their underlying securities. We find that ETF trading increases Informational Efficiency for stocks with weak information environments and for stocks with imperfectly competitive equity markets. The increase in Informational Efficiency results from the timely incorporation of systematic earnings information. In contrast, we find no such effect for stocks with stronger information environments and stocks with perfectly competitive equity markets. ETF trading increases return co-movement, and this increase is partly attributable to the timely incorporation of systematic earnings information. Using S&P 500 index additions and deletions as an additional setting and Russell 1000/2000 index reconstitution as an identification, we corroborate our main findings.
Cecilia Parlatore - One of the best experts on this subject based on the ideXlab platform.
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trading costs and Informational Efficiency
Journal of Finance, 2021Co-Authors: Eduardo Davila, Cecilia ParlatoreAbstract:This paper studies the effect of trading costs on information diffusion and information acquisition in financial markets. For a given precision of investors' private information, an irrelevance result emerges when investors are ex-ante identical: the level of trading costs does not affect price informativeness or price volatility. This result holds independently of whether investors behave competitively or strategically and applies to both static and dynamic economies. When investors are ex-ante heterogeneous, trading costs affect price informativeness if and only if investors who disproportionately trade on information are more elastic than investors who mostly trade due to hedging. Trading costs always reduce information acquisition, even when price informativeness remains unchanged for a given amount of information. Our results matter to understand a) the consequences of cheaper financial trading and b) the effects of transaction taxes.
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trading costs and Informational Efficiency
Social Science Research Network, 2016Co-Authors: Eduardo Davila, Cecilia ParlatoreAbstract:We study the effect of trading costs on information aggregation and information acquisition in financial markets. For a given precision of investors’ private information, an irrelevance result emerges when investors are ex-ante identical: price informativeness does not depend on the level of trading costs. This result holds independently of whether trading costs are quadratic or linear, investors behave competitively or strategically, and applies to both static and dynamic economies. When investors are ex-ante heterogeneous, trading costs reduce (increase) price informativeness if and only if investors who disproportionately trade on information are more (less) elastic than investors who mostly trade due to hedging. Trading costs always reduce information acquisition and consequently price informativeness, even when price informativeness remains unchanged for a given amount of information. Our results matter to understand the consequences of cheaper financial trading and the effects of financial transaction taxes.
François Maniquet - One of the best experts on this subject based on the ideXlab platform.
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On the Informational Efficiency of simple scoring rules
Journal of Economic Theory, 2011Co-Authors: Johanna M. M. Goertz, François ManiquetAbstract:We study information aggregation in large elections. With two candidates, efficient information aggregation is possible (e.g., Feddersen and Pesendorfer [5], [6] and [7]). We show that this result does not extend to elections with more than two candidates. We study a class of simple scoring rules in voting games with Poisson population uncertainty and three candidates. No simple scoring rule aggregates information efficiently, even if preferences are dichotomous and a Condorcet winner always exists. We introduce a weaker criterion of Informational Efficiency that requires a voting rule to have at least one efficient equilibrium. Only approval voting satisfies this criterion.
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on the Informational Efficiency of simple scoring rules
Research Papers in Economics, 2009Co-Authors: Johanna M. M. Goertz, François ManiquetAbstract:We study information aggregation in large elections. With two candidates, efficient information aggregation is possible (e.g., Feddersen and Pesendorfer [5], [6] and [7]). We show that this result does not extend to elections with more than two candidates. We study a class of simple scoring rules in voting games with Poisson population uncertainty and three candidates. No simple scoring rule aggregates information efficiently, even if preferences are dichotomous and a Condorcet winner always exists. We introduce a weaker criterion of Informational Efficiency that requires a voting rule to have at least one efficient equilibrium. Only approval voting satisfies this criterion. (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.) (This abstract was borrowed from another version of this item.)
