Firm Disclosure and Individual and Institutional Investors

Download or read book Firm Disclosure and Individual and Institutional Investors written by Stefan Anchev and published by . This book was released on 2020 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We empirically examine whether and how firm disclosures are related to the stock portfolio allocation and performance of individual and institutional investors. Our results suggest that, when the disclosure of a certain firm is greater (or increases), (1) the contemporaneous demand for that firm's stock of individual investors is weaker (or weakens more) than that of institutional investors, (2) the subsequent demand for the firm's stock of individual investors is stronger than that of institutional investors, (3) from the perspective of the CAPM, only the stock portfolio weights allocated by institutional investors to the firm's stock are suboptimal, and (4) the returns earned on the firm's stock over the next 6 (but not 12) months by individual investors are lower than those earned by institutional investors. These results appear after controlling for various firm, stock and investor characteristics and they are both statistically and economically meaningful. Overall, therefore, they support the hypothesis that, by offering opportunities for producing more private information about a certain firm at a given cost, the greater disclosure of that firm contemporaneously creates and/or exacerbates temporary (but not necessarily brief) information asymmetries between investors that pay that cost and those that do not pay the cost.