| 来源类型 | Working Paper |
| 规范类型 | 报告 |
| DOI | 10.3386/w25751 |
| 来源ID | Working Paper 25751 |
| Can the Market Multiply and Divide? Non-Proportional Thinking in Financial Markets | |
| Kelly Shue; Richard R. Townsend | |
| 发表日期 | 2019-04-15 |
| 出版年 | 2019 |
| 语种 | 英语 |
| 摘要 | Nominal stock prices are arbitrary. Therefore, when evaluating how a piece of news should affect the price of a stock, rational investors should think in percentage rather than dollar terms. However, dollar price changes are ubiquitously reported and discussed. This may both cause and reflect a tendency of investors to think about the impact of news in dollar terms, leading to more extreme return responses to news for lower-priced stocks. We find a number of results consistent with such non-proportional thinking. First, lower-priced stocks have higher total volatility, idiosyncratic volatility, and market betas, after controlling flexibly for size. To identify a causal effect of price, we show that volatility increases sharply following pre-announced stock splits and drops following reverse stock splits. The returns of lower-priced stocks also respond more strongly to firm-specific news events, all else equal. The economic magnitudes are large: a doubling in a stock's nominal price is associated with a 20-30% decline in its volatility, beta, and return response to firm-specific news. These patterns are not exclusive to small, illiquid stocks; they hold even among the largest stocks. Non-proportional thinking can explain a variety of asset pricing anomalies such as long-run and short-run reversals, as well as the negative relation between past returns and volatility (i.e., the leverage effect). Our analysis also shows that the well-documented negative relation between risk (volatility or beta) and size is actually driven by nominal prices rather than fundamentals. |
| 主题 | Microeconomics ; Behavioral Economics ; Financial Economics ; Portfolio Selection and Asset Pricing ; Financial Markets ; Behavioral Finance |
| URL | https://www.nber.org/papers/w25751 |
| 来源智库 | National Bureau of Economic Research (United States) |
| 引用统计 | |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/583425 |
| 推荐引用方式 GB/T 7714 | Kelly Shue,Richard R. Townsend. Can the Market Multiply and Divide? Non-Proportional Thinking in Financial Markets. 2019. |
| 条目包含的文件 | ||||||
| 文件名称/大小 | 资源类型 | 版本类型 | 开放类型 | 使用许可 | ||
| w25751.pdf（1053KB） | 智库出版物 | 限制开放 | CC BY-NC-SA | 浏览 | ||
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