An Empirical Study on the Heterogeneous Response of Stock Returns to the Public Information

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An Empirical Study on the Heterogeneous Response of Stock Returns to the Public Information [MASS 2012]
Author(s)
Wenjun Xue, Zhongxin Ni
ABSTRACT
In this paper, we employ quantile regression model to study which types of public information influence the stock returns and whether there exists a heterogeneous response for stock returns to the public information. We divide the public information into three types which are, respectively, company specific information, stock market information and macro- economic information. The empirical results show that: (1) compared with the company specific information, stock market and macroeconomic information has more power to explain expected stock returns (2) due to investors’ psychological deviation including self contribution and conservation bias, there exist significant heterogeneous responses to the public infor- mation. The investors tend to overestimate the good news when the market is bull, while to underestimate the good news when the stock market is bear.
KEYWORDS
stock returns; quantile regression; economic information; psychological deviation
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