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Issue 5(1), October 2010 -- Paper Abstracts

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JOURNAL OF ACCOUNTING AND FINANCE

The Asymmetric Impacts of Good and Bad News on Opinion Divergence:

Evidence from Revisions to the S&P 500 Index

Author(s): Jin Yu, Haigang Zhou

Citation: Jin Yu, Haigang Zhou, (2013) "The Asymmetric Impacts of Good and Bad News on Opinion Divergence: Evidence from Revisions to the S&P 500 Index," Journal of Accounting and Finance, Vol. 13, Iss. 1, pp. 89 - 107

Article Type: Research paper

Publisher: North American Business Press

Abstract:

Motivated by the ambiguity theory of Epstein and Schneider (2003, 2008), we hypothesize that investors'

beliefs on the prospects of firms converge upon the arrival of bad news, but do not converge - or even

further diverge - on the arrival of good news. We expect firms with high divergence in opinions to

experience lower stock returns around the announcements of bad news but not for good news. Using

revisions to the S&P 500 index between 1962 and 2008 as information events, we find overwhelming

support for the hypothesis. The results are robust to controlling for alternative hypotheses of price

changes around revisions to the S&P 500 index, as well as common firm characteristics.