Testing Disagreement Models

Yen-Cheng Chang, Pei‐jie Hsiao, Alexander Ljungqvist () and Kevin Tseng

Journal of Finance, 2022, vol. 77, issue 4, 2239-2285

Abstract: We provide plausibly identified evidence for the role of investor disagreement in asset pricing. Our natural experiment exploits the staggered implementation of the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, which induces a reduction in investor disagreement. Consistent with models of investor disagreement, EDGAR inclusion helps resolve disagreement around information events, leading to stock price corrections. The reduction in disagreement following EDGAR inclusion also reduces stock price crash risk, especially among stocks with binding short‐sale constraints and high investor optimism.

Date: 2022
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https://doi.org/10.1111/jofi.13137

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Working Paper: Testing Disagreement Models (2020)
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