Working Papers

 

  • “Data Abundance and Asset Price Informativeness”,  with Jérôme Dugast, Last Revised: August 2017. Forthcoming in the Journal of Financial Economics.

    • Abstract: Information processing filters out the noise in data but it takes time. Hence, low precision signals are available before high precision signals. We analyze how this feature affects asset price informativeness when investors can acquire signals of increasing precision over time about the payoff of an asset. As the cost of low precision signals declines, prices are more likely to reflect these signals before more precise signals become available. This effect can ultimately reduce price informativeness because it reduces the demand for more precise signals (e.g., fundamental analysis). We make additional predictions for trade and price patterns.
  • Noisy Stock Prices and Corporate Investment” with Olivier Dessaint, Laurent Frésard, and Adrien Matray. February 2018. Presented at the NBER Corporate Finance Meeting and American Finance Association Meetings, 2017. 
    • Shows that non fundamental shocks to firms’ stock prices affects corporate investment because managers use stock prices a signals and have limited ability to filter out the noise in these signals
    • Latest draft available (SSRN).
    • Abstract: Firms significantly reduce their investment in response to non-fundamental drops in the stock price of their product-market peers. We argue that this result arises because of managers’ limited ability to filter out the noise in stock prices when using them as signals about their investment opportunities. The resulting losses of capital investment and shareholders’ wealth are economically large, and affect even firms that are not facing severe financing constraints or agency problems. Our findings offer a novel perspective on how stock market inefficiencies can affect the real economy, even in the absence of financing or agency frictions.
  • “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)