Workshop Series: Mitch Warachka

10 November, 2011 - 10:30 to 12:00
Room 430 Joyce Ackroyd Building 37

Abstract:
We develop and test a frog-in-the-pan (FIP) hypothesis that predicts investors are less attentive to information arriving continuously in small amounts than to information with the same cumulative stock price implications arriving in large amounts at discrete timepoints. Intuitively, we hypothesize that a series of gradual frequent changes attracts less attention than infrequent dramatic changes. Consistent with our FIP hypothesis, we find strong evidence that continuous information induces stronger and more persistent return continuation. Over a six-month holding period, momentum decreases monotonically from 8.86% for stocks with continuous information during their formation period to 2.91% for stocks with discrete information but similar cumulative formation-period returns. Analysts forecast errors are also consistent with the FIP hypothesis. Finally, higher media coverage and higher analyst coverage are associated with discrete and continuous information, respectively, while management press releases coincide with continuous good information.

Mitch Warachka, Associate Professor, LKC School of Business, Singapore Management University

Dr Mitch Warachka is an Associate Professor at L.K.C. School of Business at Singapore Management University. Mitch has received a number of awards and they include 2010 Lee Kong Chian School of Business Research Excellence Awards; Best Paper Award at the 2006 China International Conference in Finance and rated as one of the Top 20 faculty members in teaching effectiveness at Singapore Management University. He is also a member of the American Finance Association, Western Finance Association and Financial Management Association. His primary research interests involve asset pricing, with an emphasis on return anomalies and he has published several articles in leading finance journals such as the Review of Financial Studies, Journal of Financial Economics, and Management Science. Mitch received his PhD from Cornell University.