Fundamental Analysis, Stock price, Fundamental signals, Future earnings

We provide evidence that higher-quality disclosure standards are associated with stock returns that are less sensitive to noise driven by investors' moods. We identify return-mood sensitivity (RMS) based on the association between index returns and urban cloudiness, a source of short-term variation in mood. Based on a stylized model, we predict and find evidence consistent with higher-quality disclosure standards reducing RMS by tilting susceptible investors' trades toward information and by facilitating sophisticated investors' arbitrage. Our findings suggest that disclosure standards play an important role in enhancing price efficiency by reducing noise in returns, particularly noise related to investors' short-term moods. Received January 31, 2014; accepted August 5, 2015 by Editor David Hirshleifer.

ABSTRACT This paper examines whether analysts and investors efficiently incorporate the informational signals from managerial linguistic complexity (e.g., Fog) into their forecasts and trading decisions. We predict that a manager’s Fog during a conference call provides a signal of their private information through their willingness to engage with analyst questions. We find that informative (obfuscatory) managerial Fog provides a positive (negative) signal of future earnings growth. We also find that analysts efficiently revise their forecasts to both positive and negative signals, whereas investors only correctly interpret obfuscation during the call; there is a delayed price reaction to informative Fog. However, when buy-side investors ask questions during a call, we find an efficient price reaction to informative Fog. Our findings highlight an important benefit of two-way interactive disclosures and underline the importance of active call participation for efficiently incorporating linguistic signals of managers’ private information. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: D82; G14; G20; M41.

ABSTRACT This paper investigates whether the business press serves as an information intermediary. The press potentially shapes firms' information environments by packaging and disseminating information, as well as by creating new information through journalism activities. We find that greater press coverage reduces information asymmetry (i.e., lower spreads and greater depth) around earnings announcements, with broad dissemination of information having a bigger impact than the quantity or quality of press‐generated information. These results are robust to controlling for firm‐initiated disclosures, market reactions to the announcement, and other information intermediaries. Our findings suggest that the press helps reduce information problems around earnings announcements.

Conference presentations differ from other voluntary disclosures in that the audience for the disclosure is co-located with managers in a well-defined physical and social setting, or “disclosure milieu.” The milieu affects the degree to which conference participants can update their prior beliefs about the firm with information signals obtained through interactions with management and other informed participants. While the average abnormal stock return and volume reactions to presentations are positive, there is a great deal of cross-sectional variation as indicated by negative median reactions. We find that conference characteristics that determine the nature of the audience and its interactions, such as sponsor, location, size, and industry-focus, are significantly associated with the market reaction, consistent with the disclosure milieu explaining the cross-sectional variation in the information content of the presentation. We also find that conference characteristics explain changes in subsequent analyst and institutional investor following, consistent with the disclosure milieu creating differences in access to management by potential new investors and analysts.

ABSTRACT We classify all institutional investors that file Form 13-F over the period 1995–2013 as either “tax-sensitive” or “tax-insensitive” based on their trading behavior and portfolio characteristics. We examine tests of the effects of investor tax-sensitivity on portfolio rebalancing, price pressure, and fund performance, and compare our measure of tax-sensitive institutional investor ownership to three measures used in prior studies. We show that our measure of tax-sensitive investors dominates other measures in the portfolio rebalancing and price pressure tests. In the fund performance test, our measure of tax-sensitivity is the only one that finds that tax-sensitive investors have significantly lower returns on their portfolio stocks, which is a new result in the literature. JEL Classifications: G11; G20; H24.