Working Papers

 

  • “Data Abundance and Asset Price Informativeness”,  with Jérôme Dugast, March 2017. Presented at American Finance Association Meetings, 2017).

    • Predicts that a decrease in the cost of access to information (“data abundance”) can reduce asset price informativeness.
    • Latest draft available (SSRN)
    • Slides
    • On-line appendix
    • Abstract: Information processing filters out the noise in data but it takes time. Hence, low precision signals are available before high precision signals. To capture this feature, we develop a model of securities trading in which investors can acquire signals (about future cash flows) of increasing precision over time. As the cost of producing low precision signals declines, prices are more likely to reflect these signals before more precise signals become available. This effect increases price informativeness in the short run but not necessarily in the long run, because it reduces the profit from trading on more precise signals. We make additional predictions for trade and price patterns.
  • Ripple Effects of Noise on Corporate Investment” with Olivier Dessaint, Laurent Frésard, and Adrien Matray. December 2015. Presented at American Finance Association Meetings, 2017

    • Shows that non fundamental shocks to firms’ stock prices affects the real investment of their product-market peers
    • Latest draft available (SSRN).
    • Abstract: Firms reduce investment in response to non-fundamental drops in the stock price of their product-market peers, as predicted by a model in which managers learn from stock prices but cannot perfectly filter out noise in prices. The model also implies the response of investment to noise in peers’ stock prices should be stronger when these prices are more informative, and weaker when managers are better informed. We find support for these predictions. Overall, our results highlight a new channel through which non-fundamental shocks to stock prices of influence real decisions.
  • “Corporate Strategy, conformism, and the stock market” with Laurent Frésard. Revised: June 2017. WFA paper 2017.

    • Predicts and find evidence that firms are more likely to imitate their peers when they rely on stock prices as a source of information.
    • Latest draft available (SSRN).
    • Slides
    • On-line appendix
    • Vox article on our paper
    • Abstract: We show that product differentiation reduces the informativeness of a firm’s stock price (or its peers’ stock prices) about the value of its growth opportunities. This results in less efficient exercise of a firm’s growth options when managers rely on information in stock prices for their decisions. This informational cost of differentiation induces conformity in product market strategies and is larger for private firms. Hence, a firm should differentiate more after going public. We confirm this prediction empirically and show that the post-IPO increase in differentiation is stronger for firms with better informed managers or less informative peers’ stock prices.

Old working papers

  • “Linkage Principle, Multidimensional Signals and Blind Auctions”,  with Stefano Lovo, 2004 (draft on SSRN)
  • “Price formation and order placement strategies in a dynamic order driven markets”, 1995 (draft)