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Article: What Explains the Dispersion Effect? Evidence from Institutional Ownership

TitleWhat Explains the Dispersion Effect? Evidence from Institutional Ownership
Authors
Hwang, CYWong, KPYi, L
KeywordsDispersion effect
Analyst incentives
Short-sale constraint
Institutional ownership
Endogeneity
Issue Date2022
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/pacfin
Citation
Pacific-Basin Finance Journal, 2022, v. 71, article no. 101698 How to Cite?
DOI: http://dx.doi.org/10.1016/j.pacfin.2021.101698
AbstractThis paper conducts a joint test of two plausible explanations (difference-in-opinion vs. analyst self-censoring) for why stocks with higher dispersion in analysts' earnings forecasts earn lower subsequent returns (the dispersion effect). We exploit exogenous variations in institutional ownership generated by the annual index reconstitution to address the endogeneity concern of institutional ownership. We find results strongly suggest that analyst self-censoring rather than the more popular difference-in-opinion story is the more plausible explanation for the dispersion effect, at least in a sample where the endogeneity bias of institutional ownership is minimized.
Persistent Identifierhttp://hdl.handle.net/10722/309365
ISSN
0927-538X
2021 Impact Factor: 3.239
2020 SCImago Journal Rankings: 0.697
ISI Accession Number ID
WOS:000882846200010

 

DC FieldValueLanguage
dc.contributor.authorHwang, CY-
dc.contributor.authorWong, KP-
dc.contributor.authorYi, L-
dc.date.accessioned2021-12-29T02:14:04Z-
dc.date.available2021-12-29T02:14:04Z-
dc.date.issued2022-
dc.identifier.citationPacific-Basin Finance Journal, 2022, v. 71, article no. 101698-
dc.identifier.issn0927-538X-
dc.identifier.urihttp://hdl.handle.net/10722/309365-
dc.description.abstractThis paper conducts a joint test of two plausible explanations (difference-in-opinion vs. analyst self-censoring) for why stocks with higher dispersion in analysts' earnings forecasts earn lower subsequent returns (the dispersion effect). We exploit exogenous variations in institutional ownership generated by the annual index reconstitution to address the endogeneity concern of institutional ownership. We find results strongly suggest that analyst self-censoring rather than the more popular difference-in-opinion story is the more plausible explanation for the dispersion effect, at least in a sample where the endogeneity bias of institutional ownership is minimized.-
dc.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/pacfin-
dc.relation.ispartofPacific-Basin Finance Journal-
dc.subjectDispersion effect-
dc.subjectAnalyst incentives-
dc.subjectShort-sale constraint-
dc.subjectInstitutional ownership-
dc.subjectEndogeneity-
dc.titleWhat Explains the Dispersion Effect? Evidence from Institutional Ownership-
dc.typeArticle-
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hk-
dc.identifier.authorityWong, KP=rp01112-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.pacfin.2021.101698-
dc.identifier.scopuseid_2-s2.0-85122486855-
dc.identifier.hkuros331237-
dc.identifier.volume71-
dc.identifier.spagearticle no. 101698-
dc.identifier.epagearticle no. 101698-
dc.identifier.isiWOS:000882846200010-
dc.publisher.placeNetherlands-

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