Extreme Categories and Overreaction to News.
What characteristics of news generate over-or-underreaction? We study the asset-pricing consequences of diagnostic expectations, a model of belief formation based on the representativeness heuristic, in a setting where news events are drawn from categories with extreme distributions of fundamentals....
| Publicado en: | Review of Economic Studies Vol. 93; no. 2; pp. 1137 - 1167 |
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| Autores principales: | , |
| Formato: | Artículo |
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Oxford University Press / USA
Mar2026
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| Acceso en línea: | Ver este registro en EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=ssf&AN=192334029&site=ehost-live header: @attributes: shortDbName: ssf uiTerm: 192334029 longDbName: Social Sciences Full Text (H.W. Wilson) uiTag: AN controlInfo: bkinfo: jinfo: jid: 00346527 REM jtl: Review of Economic Studies issn: 00346527 maglogo: N pubinfo: dt: Mar2026 vid: 93 iid: 2 pid: 622 pub: Oxford University Press / USA artinfo: ui: 192334029 10.1093/restud/rdaf037 ppf: 1137 ppct: 30 formats: tig: atl: Extreme Categories and Overreaction to News. aug: au: Kwon, Spencer Y Tang, Johnny affil: Brown University, USA Cornell University, USA su: Heuristic Investors Outliers (Statistics) Announcements Prices of securities Investment risk sug: subj: Heuristic Investors Securities Brokerage Investment Banking and Securities Dealing Outliers (Statistics) Announcements Prices of securities Investment risk keyword: Asset pricing Behavioural finance copyrightHolder:Review of Economic Studies Ltd copyrightYear:2026 inLanguage:en Overreaction publisher:Oxford University Press sameAs:https://dx.doi.org/10.1093/restud/rdaf037 Underreaction Asset pricing Behavioural finance copyrightHolder:Review of Economic Studies Ltd copyrightYear:2026 inLanguage:en Overreaction publisher:Oxford University Press sameAs:https://dx.doi.org/10.1093/restud/rdaf037 Underreaction ab: What characteristics of news generate over-or-underreaction? We study the asset-pricing consequences of diagnostic expectations, a model of belief formation based on the representativeness heuristic, in a setting where news events are drawn from categories with extreme distributions of fundamentals. Our model predicts greater overreaction to news belonging to categories with more extreme outliers, or tail events. We test our theory on a comprehensive database of corporate news that includes news from twenty-four different categories, including earnings announcements, product launches, mergers and acquisition, business expansions, and client-related news. We find theory-consistent heterogeneity in investor reaction to news, with more overreaction in the form of greater post-announcement return reversals and trading volume for news categories with more extreme distributions of fundamentals. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: N holdings: @attributes: islocal: N |
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