Market Reactions to Tangible and Intangible Information

  title={Market Reactions to Tangible and Intangible Information},
  author={Kent D. Daniel and S. Titman},
  journal={Behavioral \& Experimental Finance eJournal},
We decompose stock returns into components attributable to tangible and intangible information. A firm's tangible return is the component of its return attributable to fundamental accounting-performance information, and its intangible return is the component which is orthogonal to this information. Our evidence indicates that intangible information reliably predicts future stock returns. However, in contrast to previous research, we find that tangible returns have no forecasting power. The… Expand
The Hidden Effect of Intangible Financial Information on the Market Value of Hospitality Firms in the United States
Intangible assets may not be fully captured in the traditional financial statements. Therefore, this study investigated the extent to which tangible financial information explains the market value ofExpand
Does the Stock Market React Differently to Intangible Asset Investments than to Tangible Asset Investments?
Using a large sample, we show that customer acquisition and customer service spending create intangible customer assets, much as research and development (R&D) spending creates intangible technologyExpand
Intangible Capital in Factor Models
We incorporate intangible investment/capital into the empirical factor models of Fama and French (1993, 2015) and Hou, Xue, and Zhang (2015), and illustrate the distinctive effects of intangibles onExpand
Measuring Intangible Capital with Market Prices
We use 1,521 acquisition purchase price allocations to estimate intangible capital stocks. The estimated depreciation of knowledge capital (R&D) is 32%, some 28% of SG&A represents investment inExpand
Idiosyncratic Cash Flows and Systematic Risk
We show that unpriced cash flow shocks contain information about future priced risk. A positive idiosyncratic shock decreases the sensitivity of firm value to priced risk factors and simultaneouslyExpand
Equity Issuance and Expected Returns: Theory and New Evidence
This paper examines an economy in which firm managers seek to maximize proceeds from equity issuance. The share issues are accommodated by competitive risk-averse investors. All agents are fullyExpand
Intangible Information and Analyst Behavior
In this paper, we study whether firm intangible information affects analyst behavior. We find direct evidence that when analysts make more judgment-intensive decisions, such as issuing stockExpand
On the Role of Intangible Information and Capital Gains Taxes in Long-Term Return Reversals
Prior studies have linked long-term reversals to the magnitude of locked-in capital gains, suggesting that reversals are driven by tax effects and not overreaction. We show that locked-in capitalExpand
Institutional Investors, Intangible Information and the Book-to-Market Effect
This paper establishes a robust link between the trading behavior of institutions and the book-to-market effect. Building on work by Daniel and Titman (2006), who argue that the book-to-market effectExpand
Economic Links and Predictable Returns
This paper finds evidence of return predictability across economically linked firms. We test the hypothesis that in the presence of investors subject to attention constraints, stock prices do notExpand


Fundamentals and Stock Returns in Japan
This paper relates cross-sectional differences in returns on Japanese stocks to the underlying behavior of four variables: earnings yield, size, book to market ratio, and cash flow yield. AlternativeExpand
Optimal Investment, Growth Options, and Security Returns
As a consequence of optimal investment choices, firms' assets and growth options change in predictable ways. Using a dynamic model, we show that this imparts predictability to changes in a firm'sExpand
What Drives Firm-Level Stock Returns?
I use a vector autoregressive model (VAR) to decompose an individual firm's stock return into two components: changes in cash-flow expectations (i.e., cash-flow news) and changes in discount ratesExpand
Understanding the Aggregate Book-to-Market Ratio
In order to connect the stock market valuation level to medium-term cash-flow fundamentals, I develop a dynamic model that links the book-to-market ratio to subsequent profitability, interest rates,Expand
The Power of Past Stock Returns to Explain Future Stock Returns
Researchers have long argued over whether strategies based on past stock returns have power to explain future stock returns. This paper finds no convincing evidence that either short-run or long-runExpand
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
This paper documents that strategies that buy stocks that have performed well in the past and sell stocks that hav e performed poorly in the past generate significant positive returns o ver three- toExpand
Returns to contrarian investment strategies: Tests of naive expectations hypotheses
Abstract This paper examines the ability of naive investor expectations models to explain the higher returns to contrarian investment strategies. Contrary to Lakonishok, Shleifer, and Vishny (1994),Expand
Market Underreaction to Open Market Share Repurchases
We examine long-run firm performance following open market share repurchase announcements which occurred during the period 1980 to 1990. We find that the average abnormal four-year buy-and-holdExpand
Evidence of Predictable Behavior of Security Returns
This paper presents new empirical evidence of predictability of individual stock returns. The negative first-order serial correlation in monthly stock returns is highly significant. Furthermore,Expand
The Debt-Equity Choice
Abstract When firms adjust their capital structures, they tend to move toward a target debt ratio that is consistent with theories based on tradeoffs between the costs and benefits of debt. InExpand