Journal article
Measuring Investors' Opinion Divergence
Journal of accounting research, Vol.47(5), pp.1317-1348
Received 20 May 2008; accepted 26 June 2009
12/2009
DOI: 10.1111/j.1475-679X.2009.00344.x
Abstract
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.
Details
- Title: Subtitle
- Measuring Investors' Opinion Divergence
- Creators
- JON A. Garfinkel - Henry B. Tippie College of Business, University of Iowa. I thank Matt Billett, Shane Corwin, Bart Danielson, Kristine Hankins, Todd Houge, Rick Mergenthaler, George Neumann, Tom Rietz, Gene Savin, Ashish Tiwari, and Anand Vijh for helpful discussions. I thank Yi Jiang and Tom Barkley for research assistance. I thank Paul Bennett and the New York Stock Exchange for allowing me to use the order data in this study. I am indebted to Marc Lipson for help through both data provision and explanations. I am especially grateful to an anonymous referee for many helpful suggestions, as well as the Editor (Ray Ball). All remaining errors are my own
- Resource Type
- Journal article
- Publication Details
- Journal of accounting research, Vol.47(5), pp.1317-1348
- Edition
- Received 20 May 2008; accepted 26 June 2009
- Publisher
- Blackwell Publishing Inc
- DOI
- 10.1111/j.1475-679X.2009.00344.x
- ISSN
- 0021-8456
- eISSN
- 1475-679X
- Number of pages
- 32
- Language
- English
- Date published
- 12/2009
- Academic Unit
- Finance
- Record Identifier
- 9984380387202771
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