Topic: The Demand-driven Information Market
Speaker: Dan Li, Chinese University of Hong Kong, Shenzhen
Time: Wednesday, 25 September, 10:00-11:30
Location: Room 217, Guanghua Building 2
We hypothesize a demand-driven information market where information production is tailored by investors’ investment constraints. Using a comprehensive data set of news releases and institutional equity holdings during the 2000–2016 period, we show that more negative (positive) news are produced for stocks overweighed (underweighted) by institutions. A natural experiment based on the 2003 mutual funds scandal confirms the negative relation between institutional investment constraints and news sentiment. The effect is more pronounced when the cost of information production is higher, especially when the distance between the information producer and a firm’s headquarter is larger. The asymmetry in information production causes stock returns to display negative skewness, increasing the probability for overweighed stocks to experience large negative price movement in the future.
Professor Dan Li is an associate professor in finance at the Chinese University of Hong Kong, Shenzhen. Her research lies at the intersection of market microstructure and corporate finance with a focus on high frequency trading, capital market, liquidity, and entrepreneurship. She has published papers in Journal of Financial Economics, Review of Financial Studies, Journal of Banking and Finance and etc. She has also published in the Wall Street Journal and Global Trading, the official magazine of the FIX Protocol. Prior to joining the CUHK Shenzhen, she was an assistant professor in finance at the University of Hong Kong between 2011 and 2017. Between 2009 and 2011 she served as an in-house researcher for the Investment Industry Regulatory Organization of Canada (IIROC), the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.
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