Presenter: Tony Cookson, University of Colorado

Title: Disagreement on the Horizon

Abstract: Using data from The Motley Fool’s social prediction platform, CAPS, we find substantial differences in stock predictions across investment horizon. Short-horizon investors react more than twice as much as long-horizon investors to earnings surprises and technical view events. Around acquisition rumors, short- and long-horizon investors update in opposite directions about the target: short-term investors become more optimistic, while long-term investors become more pessimistic. Motivated by these findings, we develop a firm-day measure of horizon disagreement, spanning from 2006 to 2022, and find it relates significantly to abnormal trading. Additionally, the disagreement-trading relation strengthens on earnings announcement days, providing new evidence on the role of model disagreement.

Host: Erik Christian Montes Schütte