Byoung-Hyoun Hwang

Initial Public Offerings as Lotteries: Skewness Preference and First-Day Returns

We find that initial public offerings (IPOs) with high expected skewness experience significantly greater first-day returns. The skewness effect is stronger during periods of high investor sentiment and is related to differences in skewness across industries as well as to time-series variation in the level of skewness in the market. IPOs with high expected skewness earn more negative abnormal returns in the following one to five years. High expected skewness is also associated with a higher fraction of small-sized trades on the first day of trading, which is consistent with a greater shift in holdings from institutions to individuals. The results suggest that first-day IPO returns are related to a preference for skewness. This paper was accepted by Brad Barber, Teck Ho, and Terrance Odean, special issue editors.

Sentiment revealed in social media and its effect on the stock market

This paper investigates the extent to which sentiment revealed by traditional media and social media affects the stock market. We extract sentiment by conducting a textual analysis of articles published in the Wall Street Journal and Seeking Alpha, a popular social-media platform. We find that social-media sentiment associates strongly with contemporaneous and subsequent stock returns, even after controlling for traditional-media sentiment. The media effect is stronger for articles more closely followed by market participants and for companies mostly held by retail investors. Together, these findings point to the importance of social media as an additional channel through which views become reflected in the stock price.

It Pays to Write Well

We quantify the effects of easy-to-read disclosure documents on firm value by analyzing shareholder reports of closed-end investment companies in which the company’s value can be estimated separately from the value of the company’s underlying assets. Using a copy-editing software application that counts the pervasiveness of the most important ‘writing faults’ that make a document harder to read, our analysis provides evidence that issuing financial disclosure documents with low readability causes firms to trade at significant discounts relative to the value of their fundamentals. Our estimates suggest that a one-standard-deviation decrease in readability decreases firm value by a full 2.5%. In situations in which investors are more likely to rely on annual reports, the readability effect on firm value increases to 3.3%.

Economic Consequences of Social Media Adoption by CEOs and CFOs

Corporate executives are becoming increasingly active on social media channels. This paper examines the economic consequences of such behavior for the underlying firms by looking at the personal Twitter activity of S&P 1500 CEOs/CFOs. Personal tweets contain news as well as reports on executives’ day-to-day activities, current interests, and mood. We provide evidence that, on the upside, personal tweets increase investor awareness and improve stock market liquidity. On the downside, tweets sometimes incite naive stock market reactions, thereby destabilizing prices. The SEC’s “embracement of social media” in April 2013 appears to have increased the “upside-effects”, while decreasing the “downside-effect”.Executives are becoming increasingly active on social media channels. This paper examines the economic consequences of such behavior for the underlying firms by looking at the personal Twitter activity of S&P 1500 CEOs/CFOs. Personal tweets contain news as well as reports on the executive’s day-to-day activities, current interests, and mood. We provide evidence that, on the upside, personal tweets can increase investor awareness and improve stock market liquidity. On the downside, tweets can sometimes incite naive stock market reactions, thereby destabilizing prices. The SEC’s “embracement of social media” in April 2013 appears to have increased the “upside-effects”, while decreasing the “downside-effect”.

The Emergence of

Corporate executives are becoming increasingly active on social media channels. This paper examines the economic consequences of such behavior for the underlying firms by looking at the personal Twitter activity of S&P 1500 CEOs/CFOs. Personal tweets contain news as well as reports on executives’ day-to-day activities, current interests, and mood. We provide evidence that, on the upside, personal tweets increase investor awareness and improve stock market liquidity. On the downside, tweets sometimes incite naive stock market reactions, thereby destabilizing prices. The SEC’s “embracement of social media” in April 2013 appears to have increased the “upside-effects”, while decreasing the “downside-effect”.Executives are becoming increasingly active on social media channels. This paper examines the economic consequences of such behavior for the underlying firms by looking at the personal Twitter activity of S&P 1500 CEOs/CFOs. Personal tweets contain news as well as reports on the executive’s day-to-day activities, current interests, and mood. We provide evidence that, on the upside, personal tweets can increase investor awareness and improve stock market liquidity. On the downside, tweets can sometimes incite naive stock market reactions, thereby destabilizing prices. The SEC’s “embracement of social media” in April 2013 appears to have increased the “upside-effects”, while decreasing the “downside-effect”.

The Economic Consequences of Having 'Social Media Savvy' Executives

Corporate executives are becoming increasingly active on social media channels. This paper examines the economic consequences of such behavior for the underlying firms by looking at the personal Twitter activity of S&P 1500 CEOs/CFOs. Personal tweets contain news as well as reports on executives’ day-to-day activities, current interests, and mood. We provide evidence that, on the upside, personal tweets increase investor awareness and improve stock market liquidity. On the downside, tweets sometimes incite naive stock market reactions, thereby destabilizing prices. The SEC’s “embracement of social media” in April 2013 appears to have increased the “upside-effects”, while decreasing the “downside-effect”.Executives are becoming increasingly active on social media channels. This paper examines the economic consequences of such behavior for the underlying firms by looking at the personal Twitter activity of S&P 1500 CEOs/CFOs. Personal tweets contain news as well as reports on the executive’s day-to-day activities, current interests, and mood. We provide evidence that, on the upside, personal tweets can increase investor awareness and improve stock market liquidity. On the downside, tweets can sometimes incite naive stock market reactions, thereby destabilizing prices. The SEC’s “embracement of social media” in April 2013 appears to have increased the “upside-effects”, while decreasing the “downside-effect”.

When Top Executives Start Having a Personal Twitter Account, What Happens to Their Firms?

Corporate executives are becoming increasingly active on social media channels. This paper examines the economic consequences of such behavior for the underlying firms by looking at the personal Twitter activity of S&P 1500 CEOs/CFOs. Personal tweets contain news as well as reports on executives’ day-to-day activities, current interests, and mood. We provide evidence that, on the upside, personal tweets increase investor awareness and improve stock market liquidity. On the downside, tweets sometimes incite naive stock market reactions, thereby destabilizing prices. The SEC’s “embracement of social media” in April 2013 appears to have increased the “upside-effects”, while decreasing the “downside-effect”.Executives are becoming increasingly active on social media channels. This paper examines the economic consequences of such behavior for the underlying firms by looking at the personal Twitter activity of S&P 1500 CEOs/CFOs. Personal tweets contain news as well as reports on the executive’s day-to-day activities, current interests, and mood. We provide evidence that, on the upside, personal tweets can increase investor awareness and improve stock market liquidity. On the downside, tweets can sometimes incite naive stock market reactions, thereby destabilizing prices. The SEC’s “embracement of social media” in April 2013 appears to have increased the “upside-effects”, while decreasing the “downside-effect”.

'Consistent' Earnings Surprises

This paper tests the hypothesis that analysts report biased earnings estimates in order to enhance their stock recommendation performance. In particular, we argue that analysts with optimistic (pessimistic) stock recommendations tend to issue negatively (positively) biased earnings forecasts so that the underlying firms are more likely to beat (miss) the consensus forecasts and thus have higher (lower) stock returns after these recommendations are issued. Consistent with this hypothesis, we find that average stock recommendations prior to earnings announcements significantly and positively predict subsequent earnings surprises. In addition, the predictability is substantially stronger when the net benefits associated with such strategic behavior are larger, for example, among firms with lower analyst coverage.