The Difference in the Informativeness of Positive and Negative Stock Returns

We show that positive daily stock returns contain more information on the long-term change in stock value than do negative daily stock returns that are noisier on average and more prone to subsequent reversals. This difference in the informativeness of negative and positive returns is larger on nondisclosure days and decreases significantly on disclosure days. Our findings suggest that while positive information about firms is constantly flowing to the market, the flow of negative information is more limited and mostly confined to disclosure days.

There are reasons why negative information is more likely to reach investors on disclosure days rather … Read more