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Article: What do stock price levels tell us about the firms?

TitleWhat do stock price levels tell us about the firms?
Authors
Issue Date2017
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jcorpfin
Citation
Journal of Corporate Finance, 2017, v. 46, p. 34-50 How to Cite?
AbstractWe hypothesize that high stock price levels impede informed trading on the stocks and reduce price informativeness. This is because uninformed trading is needed to facilitate informed trading, and high stock prices may impose budget constraints on uninformed investors. Indeed, we find, for high-price firms, (i) options to stock trading volume (O/S), an informed trading measure in options market, is higher, (ii) price informativeness about future earnings is lower, and (iii) investment sensitivity to price is lower. We also find these patterns reverse after stock splits, suggesting that firms can use splits to improve informed trading and enhance price informativeness.
Persistent Identifierhttp://hdl.handle.net/10722/243213
ISSN
2017 Impact Factor: 2.215
2015 SCImago Journal Rankings: 1.446
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorChan, K-
dc.contributor.authorLI, F-
dc.contributor.authorLin, J-
dc.contributor.authorLin, T-
dc.date.accessioned2017-08-25T02:51:43Z-
dc.date.available2017-08-25T02:51:43Z-
dc.date.issued2017-
dc.identifier.citationJournal of Corporate Finance, 2017, v. 46, p. 34-50-
dc.identifier.issn0929-1199-
dc.identifier.urihttp://hdl.handle.net/10722/243213-
dc.description.abstractWe hypothesize that high stock price levels impede informed trading on the stocks and reduce price informativeness. This is because uninformed trading is needed to facilitate informed trading, and high stock prices may impose budget constraints on uninformed investors. Indeed, we find, for high-price firms, (i) options to stock trading volume (O/S), an informed trading measure in options market, is higher, (ii) price informativeness about future earnings is lower, and (iii) investment sensitivity to price is lower. We also find these patterns reverse after stock splits, suggesting that firms can use splits to improve informed trading and enhance price informativeness.-
dc.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jcorpfin-
dc.relation.ispartofJournal of Corporate Finance-
dc.rightsPosting accepted manuscript (postprint): © <year>. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/-
dc.titleWhat do stock price levels tell us about the firms?-
dc.typeArticle-
dc.identifier.emailLin, T: chunlin@hku.hk-
dc.identifier.authorityLin, T=rp01077-
dc.identifier.doi10.1016/j.jcorpfin.2017.06.013-
dc.identifier.hkuros274164-
dc.identifier.volume46-
dc.identifier.spage34-
dc.identifier.epage50-
dc.identifier.isiWOS:000413284700003-
dc.publisher.placeNetherlands-

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