Roland Gillet

Dividend Policy and Reputation

We examine the role of reputation when firms use dividends to signal their profitability. We analyze a signaling model in which reputation plays no role in equilibrium. We then show that taking reputation into account as a link between sequential dividend decisions makes it possible to endogenize signaling costs and obtain a separating equilibrium. Lastly, we use the reversibility hypothesis and assume that in each period, managers can reverse their choices in terms of dividend distribution. We find that in most cases, the signaling equilibrium becomes unstable, causing any dividend signaling policy to become difficult to implement. Copyright (c) 2008 The Authors Journal compilation (c) 2008 Blackwell Publishing Ltd.

When Machines Read the Web: Market Efficiency and Costly Information Acquisition at the Intraday Level

Nous etudions l’hypothese d’efficience des marches au niveau intra-journalier en analysant les reactions du marche aux tweets negatifs et rapports publies sur Internet par un vendeur a decouvert. A l’aide d’etudes d’evenements, nous constatons que les investisseurs peuvent generer un profit anormal, faible mais significatif, en passant des ordres tres rapidement suite aux informations publiques publiees sur les reseaux sociaux. La reaction du marche aux tweets est plus forte lorsqu’une entreprise est mentionnee pour la premiere fois sur Twitter, ce qui montre que les investisseurs sont capables d’identifier les informations pertinentes en temps reel. Nous constatons egalement que les traders qui parviennent a identifier les informations sur le site Internet du vendeur a decouvert avant la diffusion de la meme information sur Twitter peuvent generer des rendements anormaux beaucoup plus importants. Comme l’acquisition d’informations sur un site web est plus couteuse et difficile que l’acquisition de la meme information sur Twitter, nos resultats fournissent des preuves empiriques soutenant le paradoxe de Grossman-Stiglitz au niveau intra-journalier. Des anomalies de marche de tres courte duree existent sur le marche boursier pour compenser les investisseurs qui ont passe du temps et ont depense de l’argent pour mettre en place des robots et des algorithmes afin d’identifier les nouvelles informations avant la foule.

Market Reaction to News and Investor Attention in Real Time

This paper develops a new framework to study investor attention in real time at high frequency. Using information retrieval approach, we construct a proxy for attention from the Twitter messages of financial experts, hedge funds and portfolio managers around the release of unscheduled news announcements. We then examine how markets react to new information in the absence and presence of attention. On implementing our methodology with high-frequency data for large-cap U.S. stocks, we find evidence that news events receiving attention on social media lead to large and persistent changes in trading activity, volatility and price jumps. When the attention is limited, however, the news effects on such trading patterns tend to be smaller and vanish quickly. With respect to reaction timing, we find that approximately one fourth of the news stories arrive first on Twitter before being reported by Bloomberg newswire. This result suggests that movements prior to news releases may not be explained only by private information, but could also be related to timestamp delays. We control for such potential biases by incorporating attention and correcting newswire timestamps. This adjustment considerably eliminates the pre-announcement effects in the data.

The challenges and implications of the Markets in Financial Instruments Directive (MiFID) and of its revision (MiFID II, MiFIR) on the efficiency of financial markets

This chapter will focus on the investigation of challenges underlined by the Markets in Financial Instruments Directive (MiFID) in view of the financial market efficiency. This chapter provides a reporting and an assessment of implications of this directive on the financial market efficiency through the selection of major academic work achieved on this subject. Its revision through MiFID II and MiFIR will also be taken into account given that it constitutes a key directive and a key regulation for the future organization and functioning of European financial markets. In conclusion, the remaining challenges towards the original objectives of MiFID will be underlined to determine what remains to be achieved to benefit from more integrated and efficient European financial markets in order to reduce the cost of capital, to generate growth and to reinforce the international competitiveness of the European Union without neglecting the rights and duties of its citizens and investors.

Incitations perverses, résultats non durables. Le rôle des politiques salariales et fiscales dans la crise financière

The credit crisis of 2007-2009 can be partly explained by the perverse incentives provided by both income and tax policies. Income policies have been designed to address the principal-agent problem but have ended up giving a strong incentive to maximize short term profits. Combined with asymetric pay-off structures, it led to risk-lover behaviors that turned to be detrimental to the organizations and their stakeholders. Tax policies have promoted indebtness through the tax deductibility of interest charges for coroporations and of mortgage for households. Differences in tax treatment have also led to the substitution of more lightly taxed stock options and capital gains to regular remunerations. A side effect of this arbitrage has been to reinforce risk-taking behaviors.